People lie on mortgage applications every day.
Fudging a few key details on a routine form can make a loan seem less risky to a lender. Instead of saying they’re buying an investment property, they claim it’s a vacation home. Maybe they don’t disclose a debt. That could make a lender feel more confident about issuing a loan with a lower interest rate and cutting the amount of down payment required.
With a few keystrokes and a signature, homebuyers can save themselves tens of thousands of dollars over the life of a 30-year mortgage — if they don’t get caught.
Federal prosecutors say they found Democratic State’s Attorney Marilyn Mosby of Baltimore doing exactly that.
The city’s top prosecutor is charged with two counts of perjury and two counts of lying on loan applications. Mosby and her lawyers maintain her innocence, claiming her prosecution is politically motivated and being run by vindictive lawyers in the U.S. attorney’s office.
Publicly available documents suggest Mosby might have misled her lenders about her finances and her plans for two Florida homes she bought — an eight-bedroom rental near Disney World and a condo on the Gulf Coast. The reason people do that, according to several experts, is to get more favorable loan terms.
Whatever the outcome of the case, experts say Mosby’s supposed ploy to save on interest and down payments wasn’t spectacular. If anything, it was commonplace, said Eric Forster, an expert witness in mortgage fraud cases who reviewed Mosby’s indictment.
“I didn’t see anything very clever done on her part,” he said. “Actually, I saw a number of things that were quite dumb. But the point is that I’ve seen people do it all the time.”
Avoiding a Disney-sized down payment
It started with the home in Kissimmee, near Orlando. Purchased in September 2020, the big house was convenient to Disney World — ideal for renting to theme park visitors.
Mortgages for investment homes are typically more expensive, with banks issuing higher interest rates and requiring a 20% down payment, said Tammy Saul, owner of Federal Hill Mortgage in Baltimore.
Mortgages for vacation homes, sometimes called second homes, are different and usually cheaper, Saul said. Banks typically require a 10% down payment for second homes because it is expected the buyer will live there part time.
When Mosby purchased the Kissimmee home, she signed a document promising she would not hire a management company or rent it out for at least a year, according to publicly available mortgage documents. However, prosecutors claim that a week before closing, Mosby signed a contract with a management company, giving it control over renting the home, a direct violation of her mortgage terms.
“A lot of people will do what she did. She’s just under scrutiny because she’s a public figure,” Saul said. “It’s not right, but it happens all the time.”
Mosby bought the Kissimmee home for $545,000, with a 10% down payment of $54,500. Had she applied for an investment property loan, the down payment likely would have doubled to $109,000.
Many people who lie about a vacation home that’s an investment property aren’t caught because federal prosecutors can’t keep up with the number of mortgage fraud complaints sent their way, Forster said.
“If it was Joe Schmo, there wouldn’t have been any indictment here,” Forster said about the vacation home agreement.
Mosby, the elected state’s attorney, is no Joe Schmo, and federal prosecutors also say she lied about her debts on the mortgage application.
At the time of her application, Mosby had a $45,000 federal tax lien against her and her husband. Marilyn Mosby claimed she didn’t know about the lien because her husband, Democratic Baltimore City Council President Nick Mosby, handled their taxes. They paid the lien off in June.
“Had she applied for a non-owner-occupied mortgage and also disclosed the tax debt, the loan would not have been approved or closed,” Saul said.
In November, as rumors of a federal investigation into her taxes swirled, Mosby sold the Kissimmee house to a Baltimore County resident for a $150,000 profit. The buyer told The Baltimore Sun they didn’t know Mosby.
Marilyn Mosby’s allegedly fake $5,000 gift from her husband
On Dec. 10, 2020, the day she attended her husband’s swearing-in outside City Hall, Mosby wrote a letter to her mortgage provider, saying she had been living for 70 days at the Kissimmee home — the same one she had an agreement to rent out, according to her indictment.
Mosby was writing the letter because she found another property, a condo on the Gulf Coast, that she wanted to buy. She needed $35,699.15 by Feb. 19, 2021, to close on the condo. As of Jan. 25, 2021, Mosby had just over $31,000 in her bank account, according to the indictment.
A few thousand dollars short, Mosby wrote a letter to her lender, saying her husband would give her $5,000 at closing. Known as a gift letter, people often submit these when they are short on down payment funds and can get the money from a family member. Gifts have to come from the donor and can’t be something the recipient has to pay back.
But prosecutors claim Nick Mosby didn’t actually give his wife $5,000. Instead, Marilyn Mosby wired $5,000 to her husband right before she got her paycheck, which gave her enough to cover the down payment. Nick Mosby then transferred the money into his savings account before putting it back in another account and sending it to the loan agent, according to the indictment of his wife. Nick Mosby has not been charged with any crimes.
So why type up a phony gift letter when waiting for another paycheck that would cover the down payment?
Lenders typically look at your account balance only once during the closing process to determine your interest rates, Saul said. Because Marilyn Mosby didn’t have enough money at the time her account was checked, prosecutors are suggesting she had to lie about the source of the rest of it, even if she would have had enough to cover the payment by the closing date.
Saul suggested Mosby opted to falsify the gift letter and proceed with the purchase, rather than wait, to keep the interest rates she was offered at the time.
Mosby also neglected to note the tax lien on this mortgage application, according to the indictment.
David B. Irwin, a Baltimore-based defense attorney and former federal prosecutor specializing in white-collar crime, said Mosby’s claim of Florida residency and the fake gift seems to show she lied to her lenders.
“It seems well-planned and thought out,” Irwin said about Mosby’s apparent plan to skirt higher interest rates and down payments.
Marilyn Mosby still owns the Gulf Coast condo, according to Florida property records.
Mosby’s retirement account withdrawals draw scrutiny
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Prosecutors charged Mosby with perjury after she made two penalty-free withdrawals from her Baltimore City retirement account in 2020. Prosecutors said she used that money, $81,000, to make down payments on the two Florida properties.
Unlike retirement accounts for private-sector employees, state and city employees cannot access their retirement accounts before retiring unless they stop working for the government or experience an “unforeseeable emergency.”
Under the CARES Act, the first pandemic relief bill, Congress loosened those rules temporarily. Government workers could draw those funds if they claimed — under penalty of perjury — a business they owned had closed or taken a loss.
“Remember, Marilyn Mosby has businesses, if you will,” her attorney, A. Scott Bolden, said in a January appearance on Roland Martin’s YouTube show. “And so, those businesses were in the travel space and they were affected by [the coronavirus] and her accountant urged her to take that money.”
She made her first retirement account withdrawal under the CARES Act rules in May 2020.
Around that same time, Mosby, under fire for frequent out-of-state travel, asked the Baltimore inspector general for an investigation into her travel and consulting businesses to prove they existed in name only. The inspector general later found Mosby deducted $5,000 in business expenses on her federal taxes for losses associated with the travel business.
“I ask that you verify that I have not taken on a single client for these companies, nor have I taken in any money,” Mosby wrote in a July 2020 letter to the inspector general. “Any insinuation to the contrary is false, misleading, and unethical.”