The government reports that the number of people who went to jail for mortgage fraud last year was at a three year high, and a healthy real estate market is only drawing more scrutiny to these crimes.
Criminal investigations of phony real estate schemes continue to be an area of concern, the Internal Revenue Service announced.
The booming real estate market has fueled mortgage fraud and other real estate schemes, said the IRS, which battles against these crimes through tax fraud investigations and money laundering charges.
Between fiscal year 2001 and fiscal year 2003, the number of real estate fraud investigations initiated by the IRS has doubled — with perpetrators ranging from mortgage brokers to drug dealers who launder their ill-gotten gains, the agency reported. During that period, the average prison term for defendants in real estate schemes nearly doubled as well.
In fiscal year 2004, statistics reflected a three-year high in the number of cases recommended for prosecution, indictments, convictions and incarceration, the government agency said.
Prosecution recommendations escalated to 148 in fiscal year 2004 from 83 in fiscal year 2002, indictments filed grew to 102 from 71, and convictions jumped to 89 from 57. Sentences increased to 78 from 64 during the period, while the incarceration rate jumped by almost 10% to 92.3%.
The IRS said the statistics indicate that its “criminal investigations of real estate fraud continue to be an area of concern.”
Common schemes identified by IRS criminal investigators include property flipping; fraudulent qualifications such as when employment history or a credit record is fabricated in order to qualify borrowers; and providing two sets of settlement statements, one to the seller showing the property’s accurate selling price and a fraudulent one to the lender reflecting a highly inflated selling price to receive a loan in excess of the value and pocket the proceeds after the loans are settled.
