Bernard Kerik spent his life enforcing the laws, and now the law is blasting him with both barrels. Kerik, the former New York Police Department commissioner who’s a close confidant of former New York City Mayor and presidential also-ran Rudy Giuliani, was indicted today on numerous corruption charges — including mortgage fraud. The charges against Kerik are a cornucopia of money-moving, favors and conspiracy, arising out of kickbacks he allegedly took from parties that had business with the city while he was working as the New York Department of Corrections’ commissioner. But the charges relating to his home mortgage application especially stand out, not as a run-of-the-mill case of government abuse, but another example of “American Dream” delusions born out of the housing boom. As the mortgage crisis has snowballed and defaults mount, regulators have been putting extra scrutiny on unsavory loan deals and fraudulent applications that they say are indicative of the greed that contributed to the downturn. Just last week, DS News reported on a summit attended by Treasury Secretary Tim Geithner, Attorney General Eric Holder and 12 state attorneys general to crack down on mortgage fraud nationwide. At issue is a loan Kerik received from National Community Bank to purchase his Riverdale, Bronx apartment. He allegedly received money for a down payment from a Manhattan Realtor, identified in the indictment only as “John Doe #6.” “Through a mortgage broker, Kerik falsely represented to the bank that two checks deposited to his bank account were wedding gifts when, as KERIK well knew, they were proceeds from the John Doe #6 loan,” the indictment reads. “Kerik also signed and caused to be submitted to the bank a uniform residential loan application… wherein he stated that no part of the down payment for the purchase of the apartment had been borrowed when, as KERIK well knew, he had paid for the down payment with proceeds from the John Doe #6 loan.”

That resembles what the Federal Bureau of Investigation calls a “silent second” scheme, in which the mortgagee misrepresents a borrowed down payment as his own money. Mortgage analysts use down-payment amounts as a chief predictor of the borrower’s likelihood to default in the future. “The inescapable fact is that seller-funded down-payment assistance is particularly susceptible to losses,” Howard Glaser, a mortgage-industry consultant and former official at the Department of Housing and Urban Development, told the Wall Street Journal last year, referring to no-money-down mortgage schemes. “Too often today’s seller-funded loan is tomorrow’s foreclosure.” Viewed in that light, borrowers like Kerik are misrepresenting their abilities to repay their mortgage when they allegedly cover up the sources of their down-payment money. The court could compel him to return the mortgage money he borrowed on the application, if it’s proven to have been falsified. But with 15 different counts against him in the indictment, Kerik faces a bigger problem than his mortgage payment: If convicted, he could face a 142-year prison sentence and nearly $5 million in fines. He will need to mount a vigorous defense to avoid jail and financial ruin. On the good side for Kerik, he knows a few lawyers. Perhaps Giuliani himself could help.