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Bringing Sentencing Sanity to Operation Malicious Mortgage

By Evan A. Jenness
August 27, 2008

The DOJ's announcement of “Operation Malicious Mortgage” (OMM) reflects a tidal wave of mortgage fraud prosecutions. Sentencings are rippling through federal courts in the nation's “top 10 mortgage fraud states” ' Florida, Georgia, Michigan, California, Illinois, Ohio, Texas, New York, Colorado, and Minnesota, and other significantly impacted states, including Arizona, Maryland, Utah, Nevada, Missouri, Indiana, Tennessee, Virginia, New Jersey, and Connecticut. See http://www.fbi.gov/publications/fraud/mortgage_fraud07.htm (FBI 2007 Mortgage Fraud Report).

Harsh sentences can be generated by a rote application of the U.S. Sentencing Guidelines in mortgage fraud cases. Everyone from low-level straw buyers to complicit appraisers, account managers, escrow officers and title insurers to mortgage brokers and bankers, underwriters and lawyers may face prison time. In most schemes grouped under the “mortgage fraud” umbrella, sentences will be driven by Guideline Sections 2B1.1(b)(1) (“loss”) and 1B1.3(a) (“relevant conduct”). See also USSG ” 2F1.1 (for frauds predating Nov. 1, 2001); 2S1.1 (money laundering); 2T1.1 (tax evasion).

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