Common Types of Mortgage Fraud for Profit

Loan Origination Fraud
This occurs when false information is submitted on a loan application to secure financing. Lenders, brokers, or borrowers might inflate income, fabricate employment, or falsify credit history. The goal is simple: get approval for a loan that shouldn’t qualify.

Straw Buyer Schemes
A straw buyer uses their clean credit and name—often unknowingly—to obtain a mortgage for someone else. The real buyer, often ineligible, benefits from the purchase while the straw buyer faces legal exposure.

Appraisal Fraud
This scheme involves inflating a property’s value through falsified appraisals. When lenders approve loans based on those numbers, they’re left vulnerable if the property goes into foreclosure.

Equity Skimming
A person acquires a property, rents it out, and collects income without paying the mortgage. This bleeds the property of its value while creating risk for tenants and lenders alike.

Foreclosure Rescue Scams
These schemes target homeowners in distress, promising help but ultimately stealing equity or transferring ownership without proper consent.

Mortgage fraud for profit is a serious federal crime, and it’s often committed by professionals within the real estate or finance industry, not just borrowers. Unlike “fraud for housing,” which usually involves misstatements by individuals trying to qualify for a mortgage, fraud for profit targets the entire lending system.

At Ludwig Law Firm, we represent clients in Little Rock and across Arkansas who are under federal investigation for mortgage fraud. These charges carry heavy penalties, but we know how to push back.

As always - if you have a legal question you want answered in a future blog, submit it via the form on this page. Now, let's dive in!

Federal Schemes and Embezzlement Patterns

In HUD-backed mortgage programs, fraud for profit often includes:

• Writing checks to cash or creating fake bonuses

• Hiring "ghost" employees and keeping the pay

• Stealing rental or laundry receipts from HUD-funded buildings

• Using staff or equipment for personal use

• Diverting FHA-insured mortgage proceeds or GNMA servicing funds

These activities are prosecuted under federal statutes like 18 U.S.C. § 1343 (Wire Fraud) and 18 U.S.C. § 1344 (Bank Fraud).

Penalties for Federal Mortgage Fraud

Federal agencies like the FBI, IRS, and HUD-OIG investigate these crimes. A conviction may include:

Facing Federal Charges in Arkansas? We Can Help.

Call 501-838-4043 or visit ludwiglawfirm.com. We’ll protect your name, your freedom, and your future.

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Disclaimer: The information provided in this blog is for general informational purposes only and is not intended as legal advice. Reading this blog or interacting with Ludwig Law Firm through this content does not create an attorney-client relationship. Every legal case is different, and you should not act or rely on any information in this blog without first consulting with a licensed attorney about your specific situation. For legal guidance tailored to your needs, please contact Ludwig Law Firm directly.

How We Defend Mortgage Fraud Cases

We start with the basics:

• Review the loan documents

• Trace the chain of communications

• Analyze appraisals, emails, and financial disclosures

• Challenge the government’s intent argument

In federal cases, the earlier you call, the more we can do. We prepare every case like it’s going to trial—and we don’t flinch.

And when a case demands both federal defense experience and aggressive courtroom pressure, we often team up with Warden Law Firm. When a client needs both finesse and firepower, a Ludwig and Warden partnership is the best option.