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What To Know About Mortgage Fraud Under Texas Law

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What To Know About Mortgage Fraud Under Texas Law


Mortgage fraud typically involves intentional misrepresentations of facts to a lender to obtain a financial benefit or secure a property loan. Mortgage fraud is a serious crime in Texas, and a person who fraudulently obtains mortgage financing can find themselves charged with a crime and facing jail time.

Chapter 32.32 of the Texas Penal Code makes it illegal to give false statements to obtain property or credit. This includes a variety of applications for financing, but Section 32.32(7) explicitly includes mortgage loans. If a person “intentionally and knowingly makes a materially false or misleading written statement” to obtain a mortgage loan, they can be criminally prosecuted.

The critical issue in these cases is intent. Mistakes can happen, and a loan applicant may unknowingly omit or include information that affects their application. Criminal law applies when a person makes the application with false information they know to be false, in order to gain a financial benefit.

The Penalties for Mortgage Fraud in Texas

If convicted, a person charged with mortgage fraud faces serious penalties. Prison terms and fines vary depending on the amount that was subject to fraudulent activity.

  • If the fraudulent conduct involved amounts between $30,000 and $150,00, a defendant faces third-degree felony charges and up to 10 years in prison, plus fines.
  • For amounts between $150,000 and $300,000, this is a second-degree felony charge punishable by up to 20 years in prison.
  • If more than $300,000 was financed fraudulently for the mortgage, this can be charged as a first-degree felony. Prison terms for first-degree felonies in Texas can range up to 99 years, plus heavy fines.

Examples of Mortgage Fraud Under Texas Law

Mortgage fraud can happen in a number of ways, usually involving some type of scheme to defraud a lender and/or seller of property. Some fraudulent activities include:

  • Straw buyers; This is when a person coordinates with others to apply for a loan using a different individual’s name and credit. Once the loan is secured, there is usually a financial kickback to the other person or members of the group involved in the scheme.
  • Air loans; Air loans are mortgage scams in which not only the borrower is fictitious, but the property is fictitious as well. Using a complex series of fraudulent maneuvers, the “borrower” obtains the loan for the non-existent property, leaving the bank with no collateral when the loan defaults. Regulations and procedural safeguards make this less common than it used to be, but air loans still occur.
  • Appraisal inflation; When loan applicants intentionally use false and inflated property appraisals to secure loans for more than what a property is worth, this is a form of mortgage fraud. Often this is done with the assistance of other individuals to create the false appraisal in exchange for kickbacks.

If You Face Charges Related to Mortgage Fraud in the Pearland, Texas Area, Our Criminal Defense Team Can Help

Mortgage fraud is taken seriously by the criminal justice system in Texas, with lengthy prison terms for those convicted. If you have been investigated or charged with mortgage fraud under the Texas Penal Code, you need a strong legal team by your side. At Keith B. French Law, our Pearland criminal lawyers will review all aspects of your case including potential defenses that can help you fight back against a criminal charge. To learn more and take the next steps in your defense, contact the offices of Keith B. French Law, PLLC online or call 832-243-6153 today.


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