English
/// 06/20/08
WASHINGTON -- More than 400 real estate industry
players have been indicted since March — including dozens over the last two
days — in a Justice Department crackdown on incidents of mortgage fraud
nationwide that stem from the country's housing crisis.
The
FBI put the losses to homeowners and other borrowers who were victims in the
schemes at over $1 billion.
"Mortgage
fraud poses a significant threat to our economy, to the stability of our
nation's housing markets and to the peace of mind of millions of American
homeowners," Deputy Attorney General Mark Filip said at an afternoon news
conference.
Since
March 1, 406 people have been arrested in the sting dubbed "Operation
Malicious Mortgage" resulting from 144 cases across the country. Sixty
people were arrested on Wednesday alone, including in Chicago, Miami,
Houston and a
dozen other regions policed by the FBI.
Law
enforcement officials said their stepped-up focus on mortgage cases aims to
combat problems that have grown out of the risky lending practices prevalent
until the mortgage market collapse started last year. Officials have identified
10 "mortgage fraud hotspots" nationwide in California,
Colorado, Texas,
Minnesota, Michigan,
Illinois, Ohio,
New York, Georgia
and Florida.
To
people who have committed fraud or are contemplating doing so, FBI Director
Robert Mueller said: "We will find you, you will be investigated and you
will be prosecuted."
Those
named in the cases include housing developers, mortgage lenders and brokers,
lawyers, real estate agents and appraisers, said Sharon Ormsby, section chief
in charge of financial crimes for the FBI.
In
some cases, gang, drug and organized crime investigations have resulted in
mortgage fraud cases because such schemes enable criminals to launder money,
Ormsby said.
Mortgage
foreclosure rescue scams, which promise to help struggling homeowners stave off
foreclosure and keep their homes, also have become a major problem, officials
said. Typically, unsuspecting owners sign over their homes and then find they
are victims of fraud.
In
separate arrests, two former Bear Stearns managers in New York were indicted Thursday, becoming
the first executives to face criminal charges related to the collapse of the
subprime mortgage market.
Across
the country, reports of mortgage fraud have soared over the past year as the
subprime mortgage market collapsed, and defaults and foreclosures soared.
Banks
reported nearly 53,000 cases of suspected mortgage fraud last year, up from
more than 37,000 a year earlier and about 10 times the level of reports in 2001
and 2002, according to the Treasury Department's Financial Crimes Enforcement
Network.
In
recent months, the FBI has been investigating more than 1,400 mortgage fraud
cases and 19 companies — including Bear Stearns — tied to the subprime mortgage
crisis.
Officials
declined to say who might be the next corporate target, but Mueller said the
investigations focus on accounting fraud, insider trading, and failure to
disclose the value of mortgage-related securities and other investments.
Under
review for potential fraud are: investment banks, hedge funds, credit rating
agencies, brokerage houses and due diligence firms — which evaluate loans
packaged into investments.
Similar
to the federal investigations of Enron Corp. and WorldCom Inc., the cases are
complex and rely on intense scrutiny of documents, Mueller said.
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