More than 400 estate agents have been charged since March, including dozens over the past two days, in a crackdown on incidents of US mortgage fraud that stem from America’s housing crisis, the Deputy Attorney General said today.
The FBI put the losses to homeowners and other borrowers who were victims in the schemes at more than €1bn (€636m).
“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 a news conference in Washington today.
Since the beginning of March, 406 people have been arrested in the sting dubbed Operation Malicious Mortgage resulting from 144 cases across America. 60 people were arrested yesterday alone, including in Chicago, Miami, Houston and a dozen other regions policed by the FBI.
Law enforcement officials said their focus on mortgage cases aimed to combat problems that have grown out of the risky lending practices prevalent until the mortgage market collapse started last year.
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, estate agents and appraisers – people who prepare appraisals of property for lawyers, said Sharon Ormsby, in charge of financial crimes for the FBI.
In some cases, gang, drug and organised 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 repossessions and keep their homes, have also 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 today the first executives to be charged in connection with the collapse of the subprime mortgage market.
Across the US, 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 and WorldCom, the cases are complex and rely on intense scrutiny of documents, Mueller said.