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Supreme Court hears arguments on sub-prime mortgage fraud

The US Supreme Court [official website] heard oral arguments [day call, PDF] on Tuesday in Robers v. United States [transcript, PDF]. The case addresses the issue of whether a defendant who owes restitution for a fraudulently obtained loan returns a portion of the loan money by giving the lenders the collateral property that secures the money. Petitioner Benjamin Robers submitted fraudulent loan documents for two houses that materially misrepresented his income and ability to repay loans. Robers eventually defaulted on the two mortgages, and the houses were foreclosed and resold for less than the value of the mortgages. Robers pleaded guilty to conspiracy to commit wire fraud, and, under Mandatory Victims Restitution Act (MVRA) [18 USC §3663A, text], must pay restitution equal to the difference between the amount of money he fraudulently took from the banks and the amount of any property he returned to the lenders. Both the lower court and the Seventh Circuit held that under the MVRA, Rober must pay restitution equal to the difference in value between the mortgages and the actual sale price.

Counsel for Robers argued in front of the Supreme Court that the amount owed in restitution should be based on the appraised value of the homes on the date of the foreclosure rather than their value on the date that the lenders sold the properties. In response, the government argued that the MVRA "focuses on ... how much of the property that was lost has been returned to the victim before sentencing." According to the government, the property lost was the money lent due to Rober's fraudulent mortgage, and so restitution should be valued when the houses are sold and money is returned to the victim: "When the property that was lost was a car, you don't get an offset for returning pineapples. When the property that was lost was money, you don't get an offset for returning the house."

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