Restitution for Federal Crimes: Supreme Court Agrees to Hear Case Involving Money Owed by Defendant Involved in Mortgage Fraud
Federal criminal cases often result in a Defendant being sentenced to jail time, as well as being ordered to pay "restitution". A 1996 law called the Mandatory Victims Restitution Act (or "MVRA") says that when the victim of a crime is entitled to restitution for the loss of "property", and it is impossible, impracticable, or inadequate to return that property, then a defendant must pay "an amount equal to (i) the greater of * * * (I) the value of the property on the date of the damage, loss, or destruction; or (II) the value of the property on the date of sentencing, less (ii) the value (as of the date the property is returned) of any part of the property that is returned.” Earlier this week, the United States Supreme Court accepted a case involving questions surrounding how to calculate restitution when the Defendant committed mortgage fraud. The question in Robers v. United States is whether the district court erred in calculating restitution for banks who lost money because of the Defendant’s loan fraud when the court reduced the victims’ losses by the amount they recouped years later from the sale of the collateral securing the loans, as opposed to reducing the amount based on the value of the collateral at the time when the victims foreclosed on the mortgaged properties. This type of questions arises with some frequency in federal criminal cases, so it's important to keep an eye on how the high Court resolves the case.
Mr. Robers was like so many Americans in the past decade. Some sharp operators figured out that inflated real estate values could be used to skim money off the top of mortgage loans. One necessary component of these schemes is that there needs to be a "straw buyer", a person without any blemishes on their credit score, but who merely signs the paperwork for the loan application, and who has no intention in actually moving into the property. The straw buyer signs bogus paperwork claiming that he or she actually makes far more money that they really do, so the foolish banks and mortgage lenders regularly gave large loans to such people to fund the purchase of inflated real estate. When the loan closed, some of the loan proceeds would get skimmed to pay for the brokers or others who organized the scheme, the straw buyer normally got a small amount of money for signing the documents, and the house went into foreclosure when the straw buyer did not make any payments. The bank or mortgage lender then was stuck with a non-performing loan. Lenders generally then took the property back, which played a large part in the recent real estate debacle.