Federal Prison Sentences Expected To Get Stiffer As Tanking Real Estate Market Drives Up Lenders' Losses From Mortgage Fraud

Buried in a recent story in the South Florida Sun Sentinel is an observation that prison sentences in federal mortgage fraud prosecutions will begin becoming stiffer than they have been:

• [U]ntil now, the punishments meted out to mortgage fraud offenders have been relatively mild — usually less than five years' imprisonment and sometimes nothing more than probation.

• That's because under federal sentencing guidelines, penalities in such cases are tied to the amount of documented financial loss. When home prices were climbing, fraudsters generally paid off their loans and lenders had no direct losses.

• Now the foreclosure crisis is driving up losses, resulting in stiffer punishment. In [one recent] case, prosecutors and defense lawyers agreed [a mortgage scam defendant's] crimes cost lenders at least $1 million because many of the properties he purchased were subsequently foreclosed on at a loss [he received eight years in prison].

Source: Mortgage fraud cases in South Florida might bring stiffer sentences (Judge imposes 8-year term, saying he wants to deter others).