Mortgage Fraud Rampant And Growing: FBI

WASHINGTON (AP) -- Falling housing prices are driving up reports of mortgage fraud, with the FBI saying Tuesday that reported losses are up 83 percent last year and climbing even higher in 2009.

In its 2008 Mortgage Fraud Report, the Federal Bureau of Investigation said the downturn in the economy, a spike in foreclosures and defaults and diminishing credit availability "fueled a rampant mortgage fraud climate fraught with opportunistic participants desperate to maintain or increase their current standard of living."

"Industry employees sought to maintain the high standard of living they enjoyed during the boom years of the real estate market and overextended mortgage holders were often desperate to reduce or eliminate their bloated mortgage payments," the report said.

The FBI considers two types of mortgage fraud. Fraud for property involves an applicant making misstatements like embellishing income and concealing debt to get a loan. The second type, fraud for profit, is a bigger problem with elaborate schemes involving falsified appraisals and loan documents and techniques like straw buyers, identity theft and shell companies.

The FBI says victims include borrowers, the mortgage industry and neighbors who ultimately lose housing value.

The report, which collects data from law enforcement, the mortgage industry and other government agencies, said the number of suspected mortgage fraud reports increased a third to 63,713 in fiscal 2008, up from 46,717 the previous year.

The report says the precise losses are unknown, but financial institutions reported $1.4 billion lost in fiscal 2008. That's an increase of 83.4 percent over the previous fiscal year, and yet the reported losses are still on the rise in the first half of the current fiscal year by $208 million more than the first six months last year.

"The downward trend in the housing market during 2008 provided a favorable climate for mortgage fraud schemes to proliferate," the report said. "Several of these schemes have the potential to spread if the current economic downward trend, as expected, continues into 2009 and beyond."

Nearly two-thirds of the pending FBI mortgage fraud investigations last year involved losses of more than $1 million. The western United States had the most FBI investigations, with the top 10 states being California, Illinois, Texas, Georgia, Ohio, Colorado, Maryland, Florida, Missouri, and New York.

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Comments

[RRoadrunner]

Re: Mortgage Fraud Rampant And Growing: FBI

No Really? What a surprise. Has anyone in the FBI been following the economy for the last year and a half?

[jsgaetano]

No. Bush and his criminal buddies had the FBI chasing their tails looking for "teh terrrrrrerrrrrists".

[jaylo]

okay...I guess I'm cut off the comments...is the FBI listening in?

[jeffp26]

Fraud is the ugly side of capitalism.

Our elected officials all commit fraud when they pretend to represent us, and then take money from corporations that only want to turn us upside and shake out money.

Our regulators allow fraud, by their sheer ineptitude and/or their own corruption.

Welcome to the real world.

[Antifascist-08]

The real world has gotten a lot worse after 8 years of worshipping at the alter of unbridled greed though unregulated capitalism.

This is a huge ball that is rolling downhill and picking up speed and mass.

[lvdragonlady]

It is people and companies doing stuff like this that are destroying America.
This kind of thing has nothing to do with 'free enterprise' or freedoms, it is nothing more then adulterated GREED.
Regardless of what people think, humans can NOT police themselves and therefore we need strong regulations in place, so when something like this happens we can put these people in jail for a very very long time and this goes for people that work for companies also.

[spinns17]

all they need is a stay at the local county jail.that will fix some of these crooks

[Furby]

No one wants to catch them. Reminds me of when our strata asked two tow truck companies in our town for a bid to tow away illegally parked vehicle at our building. All the companies declined because they had friends living there. No way out.

[FoonTheElder]

The FBI walks in after the massive frauds are over and picks up a few stragglers. At the same time, all the people who made millions from the frauds are laughing all the way to the bank.

[jaylo]

Yep...and the FBI makes sure they get the dangerous ones like the poor, black, single mother in the picture who works three jobs...yep...just another day of the FBI keeping our country safe.

[Liberal2]

Golly, I feel safer already. Not.

[joecoolconservative]

Yes. They should only be arresting white criminals. After all, how could a poor, black, single mother possibly be a criminal? Fraud perhaps?

[outnow]

They are the bank.

[GardenerNorCal]

The FBI is investigating consumers? When is the anyone going to investigate the Lenders aren't they the ones that took taypayer money?

[truelockCA]

Of Course It Is! ACORN is still around

[FoonTheElder]

Contrary to the right wing babbling, Acorn was about the only organization that protested against the fraudulent loans that were being sold to poor homeowners in big cities.

http://www.opednews.com/articles/ACORN-s-Response-to-McCain-by-David-Swanson-081011-252.html

[littlepuffycloud]

Why do you bother the trolls with your facts, when facts only mess up FattyPants Limbaugh's talking points?

[jaylo]

The reason the middle class has been living on credit for the last 20 years, is they have not had any real wage increases.

My neighbors have a four year old daghter with cerebral palsy. She can't walk (or talk) and she needs braces and physiotherapy...the problem is her father who is self-employed has to pay $1500 per month on co-pay health insurance, then he has to spend hours on the phone arguing for the benefits that she should be receiving...of course the insurance company says that getting the little girl the help she needs is not covered. ...or elective.

God help him if he breaks any rules.

[Liberal2]

"...The reason the middle class has been living on credit for the last 20 years, is they have not had any real wage increases...."

And the cost of living (especially for the lower 50% of American familes) has doubled.

[ProAmericanLobbyist]

The FBI is a fraud. Where are the convictions resulting from the FBI Investigations?

Where was the FBI when Wall Street stole trillions in the Housing Bubble?

[Peter007]

Its a bogus news story. It said "Suspicious" activity is up. That means that regulators are now questioning every line on an application. Suspicious activity doesn't mean criminal activity.
What is happening is that every item in a loan package, no matter how insignificant, is being examined. Loan applications are now taking over 3 months to process.
One of the reasons that money is not being lent out is due to the bureaucratic red tape.
Example,... if an applicant puts down he earns $45,000 income on his application, and his last years income was $35,000. That's suspicious activity. The loan gets red flagged and the loan may be denied.

[filabac]

Yea, and what is your point? That people should be able to lie on loan applications and no one should bother to review them so loans can get approved in 48 hours? Isn't this what got us into this mess.

[Antifascist-08]

Please. There is fraud all over the place and that is why they are looking into it.

Where have you been, besides sitting by your radio tuned to Rush.

You might be surprised to know that most of the fraud during the collapse was on the part of the lenders, not the applicants. If anyone was going to falsify income it was the lenders. This has been documented many times.

[Furby]

Money isn't being lent out because few people qualify.

[OlongapoEd]

(sarcasm alert)
All right-thiking men know that you can't cheat an honest man, so there was no fraud here!

[PrayingforReagan]

Everyone loves to blame the banks and mortgage brokers (and they deserve a lot of the blame) but lets not excuse the millions of Americans who used their homes at ATM machines so they could have 5 flat screen tv's, a leased lexus and a 10K vacation every year.

The most prevalent loan in South Florida and Southern California was the Pick a Pay loan. People willing chose a loan with a deferred interest option. So for say 500K your payment would be 1200 a month. The difference gets added to your loan. So people bought more than they could even think to afford.

Then the banks would count the 2000 a month interest that was only on paper as REALIZED PROFIT and pay huge bonuses off of fake earnings.

[Antifascist-08]

Exactly. If this little "bubble" was just that, the whole world would not be suffering. These fraud cases are massive.

How do you suppose the big bonuses were paid? Where would that kind of money come from? They were paid in advance on "profits" that assumed the housing market would continue for the next twenty years. This is fraud.

You can blame ignorant people if you want, but the people who used to protect and advise people when they bought homes turned against the system in their quest for money. Their actions make anyone with a charged up credit card look like a penny pincher.

[outnow]

The purchase money mortgage in California is "non-recourse." When you refinance, however, you are signing a recourse waiver in effect and then you are personally on the hook for the balance. Interest only loans and negative loans are still out there.

The banks are still able to bundle these loans and sell them down the line as derivatives. Fees are taken up front. The buyer comes back for a refinance when he is strapped and the trap closes. He is not on the hook. Plus, in bankruptcy court, he cannot dischage a fraudulent debt. Since he inflated his income or whatever, he is screwed.

In an up market, the buyer could refinance continuously and use the cash to pay the mortgage. In a down market, thye piper has to be paid.

Banks do not have to use prudent lending standards in this senario because they have bundled the risk off their balance sheet.

[zenwhenicanbe2]

Losses, not Loses

[jaylo]

The gov't has to keep the little people in check. because if the middle class starts getting any idea that they can get away with fraud like the rich and the bank ceo's, the country will collapse.

Likewise, a friend of mine from treasury, told me that the gov't doesn't worry about the rich or banks banking offshore to avoid taxes. However, they watch very closely for any signs that ithe middleclass might follow suit. At this point, the gov't knows they have to clamp down. The country can survive the rich breaking the rules, but not the middle class.

If we want to send the feds a message about bank regulation, then we shouldn't have tea parties...the middle class should have a call to action to forgo credit card payments for one month. This is guaranteed to bring the banks, the feds and the gov't to the table...on their knees.

[Navision]

What you need to remember is, it is the Citigroups, BofA, Chase, etc. that own the majority of these small predatory regional mortgage companies.


Also, today in a very obscure article on Yahoo, Boone T. Pickens announced he is dropping his Wind Farm Plans, because he can't get funding. Wall Street has stopped him in his tracks.

[truelockCA]

No ...investors of any sort look at the cost per MegaWatt and it has no chance of making money. Also I could never figure out how any environmentalist would stand for it....have you seen Palm Springs?

[Liberal2]

No, conventional methods of producing electrical power are highly subsidized. For example: coal mining companies are required by law to return strip-mined areas back to environmentally acceptable conditions. But those laws are not enforced. Saves 'em tons of money.

[ditsylilg]

yes, 'cause he doesn't want to put his money where his mouth is. gotta love a billionaire who can't invest his own money...