Criminal defense attorneys handling mortgage fraud cases in Miami, Fort Lauderdale, and Palm Beach encounter a type of mortgage fraud that is a lot more involved than merely making misrepresentations on a loan application. In this section we will be discussing mortgage fraud cases that concern a strategy called “working the gap.”
Working the Gap
When a person engages in mortgage fraud by working the gap, he/she is essentially trying to take advantage of the time lag that is inherent in the recording process. When we refer to “recording” in this section, we are referring to the recording of title with the local clerk of courts or property appraiser.
For those who may not be aware, there is usually a gap between the point in time when a deed is filed for recording and the point in time when the deed shows up in official records.
This period of time is crucial because it enables fraudulent loan applicants to obtain mortgages from multiple lenders using the same property. To be successful at this type of mortgage fraud, a person will need submit his/her loan application at the precise point in time when a deed has been filed for recording, but has not yet been documented and made available for search.
As a result, when the banks perform a title search, they will not see each other’s liens on the same property. This causes the banks to incorrectly believe that they would have a superior lien in the event that the subject property needs to be foreclosed upon. Believing that their lien would be superior, they agree to loan money to the applicant.
To be clear, this type of mortgage fraud targets an inherent weakness in the recording system. When banks are aware of other liens on the same property they will either deny a loan application outright. Or , in the alternative, they will agree to loan a smaller amount of money.
Ultimately, mortgage fraud by “working the gap” is aimed at gaming the system to trick banks into loaning money they otherwise would never agree to loan.
When a criminal defense lawyer represents someone accused of mortgage fraud for working the bank, the first step is to determine if the client acted innocently by simply applying for mortgages with more than one bank at the same time or if they acted with intent to defraud.
Answering this question can be as easy as reviewing the client’s answers in the loan application or by assessing the client’s conduct after the loans were issued.