2009 Mortgage Fraud Report Released. DOJ Announces 485 Arrests

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The FBI has released the 2009 Mortgage Fraud Report

Excerpts from the report...

The purpose of this study is to provide insight into the breadth and depth of mortgage fraud crimes perpetrated against the United States and its citizens during 2009. This report updates the 2008 Mortgage Fraud Report and addresses current mortgage fraud projections, issues, and the identification of mortgage fraud “hot spots.”

KEY FINDINGS:

  • FBI mortgage fraud pending investigations increased 71 percent from fiscal year (FY) 2008 to FY 2009.
  • HUD-OIG pending investigations increased 31 percent from FY 2008 to FY 2009.
  • Sixty-six percent of all pending FBI mortgage fraud investigations during FY 2009 involved dollar losses totaling more than $1 million.
  • FBI mortgage fraud-related FinCEN SAR filings increased 5.1 percent from FY 2008 to FY 2009.

Top states for mortgage fraud during 2009: California, Florida, Illinois, Michigan, Arizona, Georgia, New York, Ohio, Texas, the District of Columbia, Maryland, Colorado, New Jersey, Nevada, Minnesota, Oregon, Pennsylvania, Rhode Island, Utah, and Virginia.

Prevalent mortgage fraud schemes: loan origination, foreclosure rescue, builder bailout, equity skimming, short sale, home equity line of credit (HELOC), illegal property flipping, reverse mortgage fraud (currently the FHA’s Home Equity Conversion Mortgage [HECM] and the primary reverse mortgage loan product being offered by lenders and targeted by fraudsters), credit enhancement, and schemes associated with loan modifications.

Emerging mortgage fraud scheme:  schemes associated with various 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. Law enforcement sources also reported increases in gang members, organized criminal groups, and domestic extremists perpetrating mortgage fraud, and the resurgence of debt elimination/redemption schemes.

A decrease in loan originations, increased unemployment, increased housing inventory, lower housing prices, and an increase in defaults and foreclosures dominated the housing market in 2009. While the economy experienced some growth in the fourth quarter of 2009 and into the first quarter of 2010, the Mortgage Bankers Association predicts that this growth will flatten or decline for the remainder of 2010 and into 2011 while rebounding in 2012.

As such, the housing market is expected to remain volatile for the next couple of years.

This report has a FULL RUNDOWN of the housing market trends and economic developments. There's some good reference material in there...

At the same time the 2009 Mortgage Fraud Report was released, the Department of Justice announced a "nationwide take down" of mortgage fraudsters.

RELEASED BY THE DEPARTMENT OF JUSTICE:

Attorney General Eric Holder, FBI Director Robert Mueller, Housing and Urban Development Inspector General (HUD-OIG) Kenneth M. Donohue, and other members of the Financial Fraud Enforcement Task Force today announced the results of a nationwide takedown, Operation Stolen Dreams, which targeted mortgage fraudsters throughout the country and is the largest collective enforcement effort ever brought to bear in confronting mortgage fraud.

The sweep was organized by President Obama’s interagency Financial Fraud Enforcement Task Force, which was established to lead an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. Starting on March 1, to date Operation Stolen Dreams has involved 1,215 criminal defendants nationwide, including 485 arrests, who are allegedly responsible for more than $2.3 billion in losses. Additionally, to date the operation has resulted in 191 civil enforcement actions which have resulted in the recovery of more than $147 million.

Unlike previous mortgage fraud sweeps, Operation Stolen Dreams focused not only on federal criminal cases, but also on civil enforcement, recovering money for victims and increasing cooperation with state and local partners. The operation was conducted in conjunction with the Department of Justice – including the FBI, U.S. Attorneys Offices, the U.S. Trustee Program and other components – as well as the Department of Housing and Urban Development, the Department of the Treasury, the Federal Trade Commission, the Internal Revenue Service, the U.S. Postal Inspection Service, the U.S. Secret Service, the National Association of Attorneys General and the National District Attorneys Association.

EXCERPTS TAKEN FROM ATTORNEY GENERAL ERIC HOLDER'S SPEECH:

The staggering totals from this sweep highlight the mortgage fraud trends we are seeing around the country. We have seen mortgage fraud take on all shapes and sizes – from schemes that ensnared the elderly to fraudsters who targeted immigrant communities. We have seen cases that have resulted in dozens of foreclosures and millions in losses, as well as fraudsters who have bankrupted entire companies and national lenders who were not playing by the rules.

In Miami, just yesterday we unsealed an indictment and arrested two defendants who allegedly targeted the Haitian-American community, often claiming they would assist them with immigration and housing issues, but then instead using victims’ personal information to produce false documents to obtain mortgage loans.

In Chico, California, a prominent home builder, caught with a significant amount of unsold new homes as the housing market cooled, allegedly used straw buyers to sell his houses at inflated prices with undisclosed sales rebates. This scheme inflated prices on other homes in the area, creating artificially high comparable sales and affecting the overall new-home market. To date, thirty-eight of the homes have fallen into foreclosure and ten more have been the subject of short sales – all in one city.

In Detroit, just yesterday we charged several individuals who are part of a more than $100 million, 70-plus person "ghost loans" scheme. The conspirators posed as mortgage brokers, appraisers, real estate agents and title agents and used straw buyers to obtain around 500 mortgages on only 180 properties.

This takedown is just the latest effort in our ongoing fight. Looking toward the future, the Department of Justice has requested $178 million in our FY2011 budget to fight mortgage fraud, an increase of over $18.4 million. The FBI has over 3,000 pending mortgage fraud cases, almost double the figure from FY08, and those numbers will only continue to grow. Additionally, the task force is working with consumer groups to increase financial literacy and better educate homeowners about warning signs of scams.

Finally, I end with two important messages. First, to homeowners who are struggling to make payments or looking to refinance your homes – there are legitimate government programs out there to help you. Visit StopFraud.gov for resources, and if you suspect suspicious activity, report it. An educated public is one of our most important partners in the fight against mortgage fraud.

Secondly, let today’s takedown send a strong message to any would-be fraudsters: If you prey on vulnerable homeowners or engage in fraudulent conduct, we will find you and we will bring you to justice. You will pay for your schemes.

DO YOU KNOW ANYONE INVOLVED IN THE "TAKEDOWN"?