Government-backed Mortgage Fraud

We can help you report bank fraud involving the housing and mortgage industry. The United States has three laws, the False Claims Act, the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), and the Financial Institutions Anti-Fraud Enforcement Act (FIAFEA) which provide compensation to eligible whistleblowers for information that results in a monetary recovery.

The False Claims Act provides awards of 15% to 25% of the amount recovered if the government joins the case, and 25% to 30% if the whistleblower prevails against the defendant without the government’s intervention. The actual amount of the reward is based on a number of factors, including the significance of the whistleblower’s information and the level of assistance provided to the government by the whistleblower and his or her attorney.

Under FIRREA, whistleblowers can file declarations concerning alleged violations of the statute and may obtain a share of the recovery up to $1.6 million.

FIAFEA allows an individual to file a declaration detailing a violation involving an action for civil penalties under FIRREA. A FIAFEA whistleblower can receive a reward of 20% to 30% of any recovery up to the first $1 million recovered, 10% to 20% of the next $4 million recovered, and 5% to 10% of the next $5 million recovered.


Subsidized Loans

Misrepresentations to the government concerning the quality of loans being subsidized and insured by U.S. housing programs including fraudulently-inflated appraisals, ineligible applicants, and failure to disclose ineligible loans detected during audits. Other types of fraud include occupancy fraud, where applicants deliberately misrepresent their intended use of the property, and “fake buyer” fraud, which involves a bogus buyer or “strawman” who allows a prospective homebuyer to assume another person’s identity to obtain approval on a mortgage loan.

Securitized Loans

Misrepresentations such as unreported second liens, owner occupancy misreporting, inflated appraisals and failure to disclose key facts about the quality of mortgage loans sold to various government agencies, including Fannie Mae, Freddie Mac and the Federal Housing Administration, in the form of Residential Mortgage-Backed Securities (RMBS) and collateralize debt obligations (CDOs).

In 2018, four defendants were charged with conspiracy to defraud Fannie Mae, Freddie Mac, and two commercial lenders by falsely providing information relied on by lenders and government-sponsored enterprises for issuing or buying mortgages. According to the indictment, the defendants fraudulently obtained more than $167 million worth of loans involving seven residential apartment complexes located in New York and in Pennsylvania. Most of the loans were ultimately sold to Fannie Mae or Freddie Mac.

Types of Mortgage Fraud

Fraud is complex and diverse. We examine common fraud types in mortgage, real estate, and loans:

Occupancy Fraud

Borrowers falsely claim that they intend to live in the property as their primary residence to secure more favorable loan terms, when they actually plan to use it as an investment property.


Fraudsters steal personal information to create fake identities and then use those identities to apply for government-backed mortgages.


This involves manipulating property appraisals to overvalue homes, making them appear more valuable than they actually are. This can lead to higher loan amounts and potentially larger payouts in case of default.


Fraudsters convince distressed homeowners to sign over their property’s title while promising to handle the mortgage payments. However, they don’t actually make the payments and instead pocket the rent or sale proceeds.

Straw Buyer Scheme 

In a straw buyer scheme, a person with good credit and financial standing poses as the borrower for a property they have no intention of living in or owning. The scheme is often used to obtain loans for individuals who wouldn’t qualify otherwise, and the real beneficiaries are hidden.

Falsifying Down Payments

Borrowers might misrepresent the source of their down payment, claiming it’s their own money when it’s actually borrowed from another party. This misrepresentation can be used to qualify for a loan or to circumvent loan-to-value (LTV) ratio limits.


Which Laws HELP MORTGAGE FRAUD Whistleblowers?

False Claims Act

For the fiscal year 2017, the Department of Justice reported settlements and judgments totaling over $543 million for fraud in the areas of housing and mortgage fraud.


 Congress passed this law following the Savings & Loan crisis in the 1980s. Since then, the government has recovered more than $5 billion from mortgage fraud before and during the Great Recession.


Provides for civil liability for fraud involving federally-insured depository institutions. FIAFEA allows the federal government to recover damages suffered by private parties.


Edward O’Donnell received around $57 million for his role in a Bank of America settlement that reached over $16.5 billion due to fraudulent activities involving mortgage-backed securities.

Whistleblowers Keith Edwards and Victor Bibby were rewarded $63.9 million for exposing JPMorgan Chase’s mortgage-backed securities fraud, leading to a $614 million settlement.

Whistleblower Kyle Lagow received $14.5 million for exposing fraud at Countrywide Financial, contributing to a $1 billion settlement.

In a Wells Fargo case involving improperly certified residential home mortgage loans, whistleblowers were collectively awarded around $11 million in a $1.2 billion settlement.

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