Mortgage fraud prosecutions in South Carolina have increased steadily in the past few years. In the aftermath of the real estate boom and bust in Grand Strand communities like Myrtle Beach, Atlantic Beach and Conway, federal prosecutors have aggressively pursued suspected cases of bank fraud involving valuation of properties and other false information.
A recent story in The Sun News detailed an innovative defense in the sentencing proceedings following a mortgage fraud conviction involving a Murrells Inlet home. Because federal sentencing guidelines for fraud crimes are based to some extent on the value of the loss caused by the defendant’s actions, the defense lawyer focused on the actual losses to the named victim of the fraud, Countrywide Financial Corp.
This white collar criminal defense strategy is based on the complexities that characterized mortgage industry dealings over the last decade. Because so many lenders like Countrywide quickly repackaged individual mortgages into mortgage-backed securities, which they in turn sold to investors, they did not themselves suffer financial losses due to future default or other problems with mortgages.
Based on that fact, the defendant’s attorney has argued that Bank of America, which now owns Countrywide, did not suffer a loss. The case is complicated by the fact that a guilty plea by the defendant referenced actual loss amounts, but criminal defense attorneys are closely watching the case. If the court recognizes the validity of the argument, it could mean significant reductions in sentences for mortgage fraud convictions, including the possibility of probation rather than incarceration.
Appeal of such a decision is likely, but a positive outcome for the defendant would likely require much more diligence on the part of federal prosecutors in the future, as they would be required to pinpoint the actual losses suffered by fraud victims in each case. By exploring every viable defense strategy to hold prosecutors to their burden of proof, an experienced fraud defense lawyer can improve the likely legal outcome in cases involving complex financial dealings.