Advice | A case of love, marriage and mortgage fraud

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The recent conviction of a former Maryland prosecutor isn’t just another story about a fallen politician. It’s a cautionary tale about marriage and money.

Marilyn Mosby, a former Baltimore state’s attorney, withdrew a total of $90,000 from her 457(b) retirement account to invest in two vacation properties in Florida. Typically, someone drawing from a retirement account before age 59½ would be subject to a 10 percent early withdrawal penalty.

But Mosby claimed she qualified for a waiver under a pandemic-related provision — intended to help struggling Americans — because her travel business had experienced “adverse financial consequences.”

Federal prosecutors argued that Mosby hadn’t suffered a coronavirus-related hardship because it was a business in name only and not operational.

She was also accused of making false statements on her mortgage applications, including submitting a letter to the lender for a $428,400 condominium in Longboat Key, Fla., claiming she had received a $5,000 gift from her husband. It turns out the money had been transferred from her own bank account to her husband’s account and then back to her, according to evidence presented during her trial. The move was to secure a better interest rate.

Mosby was convicted of two counts of perjury last year in connection with the $40,000 and $50,000 withdrawals from her City of Baltimore retirement funds. This week she was convicted on the federal charge of making a false mortgage application related to the $5,000 transfer.

Ex-Baltimore prosecutor Marilyn Mosby convicted of mortgage fraud

The criminal aspect of the case was salacious enough, but it also provided an intimate look into Mosby’s marital finances. Testimony revealed financial secrets, a colossal lack of communication, and a couple clearly living well above their six-figure means.

Mosby is now divorced from her husband, Baltimore City Council President Nick Mosby (D). While you can never know the full extent of what happens in a marriage, there are many lessons to glean from a political power couple who, behind doors, weren’t operating as a team.

Here are some takeaways from the Mosby saga that weren’t just red flags but firework explosions.

During the trial, Nick Mosby admitted he was hiding crucial financial information about their tax situation. The IRS had placed a $45,000 lien against all properties owned by the couple.

A recent Bankrate survey found that 42 percent of U.S. adults who are married or living with a romantic partner have kept or are keeping a financial secret from their significant other.

Secret spending is the most common indiscretion.

Thirty percent of Americans admit that they spend more than their partner would like. The secrets spanned from undisclosed debt, bank accounts and credit cards.

Secrecy can severely damage a relationship. Even if you maintain separate bank accounts, be honest and transparent. (If there is abuse happening, and you’re trying to protect yourself, that’s different.)

The Mosbys appeared to have kept their finances so separate that it prevented them from working together.

His wages had been garnished because of unpaid student loans, his car repossessed — twice — and he often fell behind on mortgage payments, which he was supposed to handle.

Opinions abound on whether couples should separate their finances to avoid fights over money. However, some studies have shown there is greater accountability when couples have shared bank accounts.

Research from the University of Notre Dame and published in the Journal of Consumer Psychology found couples were less likely to splurge when they had joint bank accounts.

Why you should keep a joint bank account. (Happy Valentine’s Day!)

“Couple members are more likely to consider whether their partner will judge their purchase when spending from a joint (vs. a separate) bank account, because they feel a greater need to justify their purchase decision to their partner,” researchers wrote.

In another paper published in the Journal of Consumer Research last year, researchers found, while following engaged or newly married couples over a two-year period, that those who merged accounts reported a higher level of satisfaction in their relationship than people with separate accounts.

“We find that couples who were assigned to have joint accounts reported greater financial harmony over time,” said Jenny Olson, one of the co-authors of the study and an assistant professor at Indiana University’s Kelley School of Business.

Olson said that joint accounts predict a more communal view of the marriage — a “we” vs. “you” and “me.” Couples have greater harmony over time, she said.

Having joint accounts isn’t a foolproof way to avoid conflicts over money, but at least it provides transparency.

You can’t be held responsible for a partner who is deceitful. It’s easy to hide a bank account or debts from your spouse.

But you can’t feign ignorance when there is enough evidence that all is not going well.

The IRS mailed dozens of tax bills to the couple’s Baltimore home, an expert testified. Jurors heard testimony that the couple’s mail would be left unopened.

The public defender for Mosby tried to argue the former prosecutor made innocent mistakes because she failed to fully read the mortgage documents she signed for the Florida properties. She’s not at fault for her husband’s poor money management, her lawyer argued.

Deception is one thing. But if you don’t read the contracts you sign and choose to ignore money issues in your marriage, you are not innocent. For goodness sake, Mosby is an attorney.

Four rules to make talking about money with your honey easier

Mosby testified she was unaware of the unpaid taxes when she submitted the first mortgage loan application in July 2020. She also said she thought her husband was making installment payments to the IRS.

The tax debt in question covered years the couple filed jointly.

Choose to be in the know. Trust, but verify.

If you file a joint tax return, you and your spouse are jointly and individually responsible for the tax and any interest or penalty due on the joint return, even if you later divorce.

You can set up an online account with the IRS and view your returns and any payments due.

For many people, even highly educated career professionals, this money stuff, including taxes, can be intimidating and complicated.

Nonetheless, spouses can’t bury their heads in the sand — abdicating their fiscal responsibility — and then complain about suffocating consequences should their partners act irresponsibly.

Passive approval of bad decision-making

I’ll end where this case began — the Florida homes.

I talked to several financial professionals about using workplace retirement accounts to invest in real estate, even in a vacation haven such as Florida. They all said it was a terrible decision.

I believe Marilyn Mosby was trying to enrich herself by renting out the properties. And her husband went along with the plan.

One of the benefits of marriage is two heads should be better than one. Don’t passively ignore financial foolishness and certainly not illegal behavior.



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