FBI Mortgage Fraud Takedown Nets 500 Arrests

June 25, 2010
KEYWORDS fraud , loan , mortgage
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Nearly 500 people, from industry insiders to straw buyers, were arrested in a nationwide mortgage fraud by the Federal Bureau of Investigation (FBI).

The agency launched “Operation Stolen Dreams” March 1. It has led to 485 arrests, 330 convictions, and the recovery of $11 million. The FBI estimates losses from mortgage fraud schemes to exceed $2 billion.

FBI Director Robert Mueller cautions there’s still much work to be done. The agency currently is pursuing more than 3,000 fraud cases—nearly double the total from the last fiscal year.

“The staggering totals from this sweep highlight the mortgage fraud trends we are seeing around the country,” says U.S. Attorney General Eric Holder. “We have seen mortgage fraud take on all shapes and sizes—from schemes that ensnared the elderly to fraudsters who targeted immigrant communities.”

For example:

  • In Miami, two people were arrested for targeting the Haitian-American community, claiming they would assist them with immigration and housing issues. Instead, they used victims’ personal information to produce false documents to obtain mortgage loans.
  • In California, a prominent home builder used straw buyers to sell his houses at inflated prices. The scheme inflated prices on other homes in the area, creating artificially high comparable sales and affecting the overall new-home market.
  • In Detroit, FBI agents arrested several individuals in a $130 million scheme orchestrated by the local chapter of a motorcycle gang. The conspirators posed as mortgage brokers, appraisers, real estate agents, and title agents. They used straw buyers to obtain 500 mortgages on 180 properties.

The FBI’s National Mortgage Fraud Task Force helps identify mortgage fraud including loan origination schemes, short sales, property flipping, and equity skimming. It has formed 23 mortgage fraud task forces in “hot spots” around the country, from California and Texas to Florida and New York.

Unlike previous mortgage fraud sweeps, Operation Stolen Dreams focused not only on federal criminal cases, but also on civil enforcement and restitution for victims. Participating federal agencies included the Department of Housing and Urban Development, Treasury Department, Federal Trade Commission, Internal Revenue Service, U.S. Postal Inspection Service, and U.S. Secret Service.

Mortgage fraud pending investigations increased 71% from fiscal year 2008 to fiscal year 2009. Sixty-six percent of all pending FBI mortgage fraud investigations during fiscal year 2009 involved dollar losses totaling more than $1 million.

Emerging mortgage fraud trends include schemes associated with economic stimulus plans/programs, commercial real estate loan fraud, short sale flops, condo conversion, property theft/fraudulent leasing of foreclosed properties, and tax-related fraud.

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