When “Coaching” Becomes a Crime — Mortgage Fraud Is Real

While waiting for a routine teeth cleaning, I overheard something that made my skin crawl. A real estate agent was on the phone, coaching someone to lie to a lender about living in a home they were buying with an FHA loan. The plan was to rent it out right away. That’s not clever or creative financing. It’s fraud.

I don’t know who the agent was, and I am unable to identify them. But what I heard was a serious breach of trust, ethics, and federal law — and something every buyer, lender, and REALTOR should understand.

Why This Matters

  • FHA loans are meant for owner-occupants. These loans are designed for people who will live in the property, not for investors planning to rent it out immediately.

  • Lying to a lender is a federal crime. Making false statements to influence a lender’s decision can result in criminal charges.

  • Agents aren’t exempt. If you coach or encourage a buyer to lie, you can be held just as responsible.

  • Ethics matter. REALTORS are required to be honest with all parties. You don’t get to bend the rules just to close a deal.

Laws Likely Violated

  • 18 U.S.C. § 1014 – False Statements to Financial Institutions: Making false or misleading statements to a lender or mortgage insurer is a federal crime.

  • 18 U.S.C. § 2 – Aiding and Abetting: Anyone who assists or encourages the commission of a crime can be charged as a principal.

  • 18 U.S.C. § 371 – Conspiracy: If two or more people agree to commit a fraudulent act and take steps toward it, everyone involved can face prosecution.

  • FHA / HUD Occupancy Rules: FHA loans require true owner-occupancy, typically for at least 12 months. Misrepresenting your intent violates federal program rules.

  • NAR Code of Ethics (Articles 1 & 2): REALTORS must protect their clients’ interests while being honest with all parties. Coaching someone to lie violates both principles.

Risks for the Buyer

  • Criminal charges for making false statements on a loan application.

  • Loan acceleration or foreclosure if the lender discovers the fraud.

  • Credit damage and long-term difficulty securing future financing.

  • Civil penalties and possible fines.

Risks for the Agent

  • Criminal liability as an aider, abettor, or co-conspirator.

  • Ethics violations that could result in fines, suspension, or removal from REALTOR associations.

  • License sanctions for dishonesty or misrepresentation under state real estate law.

Doing It the Right Way

  • Be truthful on every document and loan application.

  • If a client intends to purchase an investment property, direct them toward the correct financing program.

  • Protect your clients — don’t guide them into potential criminal activity.

  • When unsure, consult your broker, compliance officer, or legal counsel.

Bottom Line

When you hear unethical or illegal behavior — like an agent coaching someone to lie — don’t ignore it. It’s not “savvy,” it’s criminal. Buyers deserve better. Our profession deserves better. Your reputation and license depend on doing things the right way. If you suspect you may have witnessed or experienced mortgage fraud you can report it at the HUD Hotline at 1-800-347-3735 or file a complaint online at: https://www.hudoig.gov/hotline

About the Author

Patrick Harris is a top-producing Realtor in Fort Wayne, Indiana, known for his straight talk, creative marketing, and dedication to doing real estate the right way. By day, he helps clients buy and sell homes with confidence and integrity. By passion, he’s also a sci-fi author writing under the pen name Pj Harris-Fool, exploring the edges of humanity, identity, and the cosmos in The Riftwalker Saga. Whether it’s contracts or characters, Patrick believes in one thing above all — authenticity matters.

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