Lying on a mortgage application can take many different forms. Many people who lie overstate their income, making it look like they are taking in more money per month than they are and so qualify for a larger loan amount. Other types of lying may include giving false information about being married, lying about where the down payment sum is coming from or giving any sort of wrong information about past debts. This is a serious concern for federal agencies and lenders and can lead to harsh penalties.
When someone lies on a mortgage, this is referred to as falsifying information, which falls under the heading of mortgage fraud. Mortgage fraud is forbidden by law and also by the contract that the borrower signs with the lender, which has language that states the borrower is swearing that all included information is accurate and that any sort of misrepresentation can lead to civil liability, which usually means the payment of money damages. The fines can vary based on the contract and the sentence.
In some cases, if the matter is brought to court, the judge will move past fines altogether and give the borrower time in jail. Judges have given out sentences lasting around 18 months, but the legal code allows for jail time lasting up to five years for basic mortgage fraud. This is no guarantee against fines, either. Some rulings may require the payment of fines along with jail time.
While the sentence can carry its own penalties, the lender takes action as well. While a mortgage fraud case is ongoing, the lender will often begin the foreclosure process. If the borrower has more than one mortgage with different lenders, then only one lender can foreclose, but the other lender will also report a loss on the loan and seek damages. Creditors not involved in mortgages at all may pick up the mortgage fraud conviction and use clauses in their own contracts to demand immediate repayment.
Naming a precise penalty is difficult due to varying rulings and state laws. Judges often rule harsher sentences for greater amounts of losses incurred by the lenders that gave out loans because of false information. There is precedent for judges including even the interest paid by the borrower as part of these losses, which can increase the severity of the penalties involved.