Mortgage Fraud - Case Study

ACC 421 – Case Study

Mortgage Fraud

Germaine Fahie

Southern New Hampshire University

Mortgage fraud is a crime in which the intent is to materially misrepresent or omit information on a mortgage loan application to obtain a loan or to obtain a larger loan than would have not been obtained had the lender or borrower known the truth. Mortgage fraud includes application fraud, wire fraud, bank fraud, mail fraud, and money laundering (Fraud Law, n.d.).

Mitchell Cohen, the owner of the now defunct Buy-A-Home real estate brokerage business participated in what turned out to be a multi-million dollar mortgage fraud scheme. It was said that during the period of April 2007 through October 2010, Cohen operated a real estate brokerage business in Queens, New York known, at various times, as Buy-a-Home LLC and First Home Brokerage LLC (Buy-a-Home). During that period, he engaged in a widespread conspiracy to defraud HUD into issuing FHA mortgage insurance and to defraud banks into purchasing the FHA-backed mortgages that had been issued to his clients in order to earn substantial profits. (Real Estate Brokerage, 2013). 

Throughout the history of the mortgage industry, there have been numerous mortgage lenders and brokers who have found and utilized loopholes in the law to obtain additional profit on their transactions for years. In this scenario, the terms of the loan are beyond the means of the ill-informed and uneducated borrower. The borrower makes a number of interest and principal payments, and then defaults (Mortgage Industry, n.d.). In other instances, straw borrowers were utilized for this purpose. A straw borrower is an individual that has a really good credit profile that purchases the property to conceal the actual owner of record (Mortgage Fraud, n.d.).

Cohen and his employees facilitated the sales of the homes by preparing false documentation to secure FHA-insured loans to fund the borrowers’ purchases (Real Estate Brokerage, 2013). A simple...