Organized Crime Finding Mortgage Fraud

The latest statistics from the Federal Bureau of Investigation confirm that mortgage fraud is on the upswing. "We can't find a chart that doesn't show up in a big way," special agent Bill Stern said at a conference on the topic earlier this month in Las Vegas.

Even worse news, the FBI's mortgage fraud coordinator in Washington said, is that the trend is moving away from rogue individuals who pull off the scams and toward members of organized crime. "Mortgage fraud is now a criminal enterprise that puts dollars in the hands of people who also are involved in such other crimes as drugs, murders and gangs," Stern told the conference.

As of early this month, the G-man reported, the number of suspicious activity reports concerning mortgage fraud is up 62 percent from a year earlier. That, he said, "is a stark increase" compared to those alleging commercial loan fraud and false statements. Also up is the number of pending cases, the number of charges and convictions and the amount of cases in which losses against financial institutions, the government and individuals exceed $1 million, Stern reported. "We are now are prosecuting new cases at the rate of one a day," he told the conference. As of the first week of December, he also reported, 54 percent of the losses attributed to mortgage fraud were more than $1 million.

Noting that the FBI must focus on these larger cases because it doesn't have the resources to pursue every suspect, Stern called on the mortgage business to work hand-in-hand with law enforcement officials at the state and federal levels. "We can't work these cases in a vacuum like we do drug cases, where lives are in danger and you don't need any special expertise," he told the meeting.

Encouraging lenders to participate in working groups and industry task forces "so we can leverage off your expertise," the FBI official said agents can't go to mortgage finance school for six months before they tackle a case of possible mortgage fraud. "We don't have agents who work only mortgage finance cases as a career. They work a terrorist case, then a fraud case, then another kind of case, and they are all very different things. So we look to industry as a resource in helping us fight this growing crime."

And to anyone in the housing finance system who has ever turned suspicious activities into the FBI for investigation and received no response, even months later, the G-man also let it be known that the agency feels your pain. "We share your frustration," he said. "Agents who devote hundreds of hours investigating cases that aren't prosecuted are frustrated, too."

Stern's mournful statement was in answer to a conference participant who wanted to know how come he never heard back from the FBI after his company had spent hundreds of thousands of dollars in time and money to investigate possible corruption.

A supervisory special agent who is the mortgage fraud point man in Washington who decides how the FBI's 56 field offices can best focus their limited resources, Stern didn't have a direct answer for the questioner, who asked what it takes to get the agency to investigate a possible crime. The man said that while his company lost $6.2 million, the state was able to gain six felony plea agreements with the perpetrators.

Stern responded that the amount of the loss seemed sizable enough to warrant the FBI's interest. But since he wasn't familiar with the case, he couldn't provide a more specific answer, other than to say "all cases can't be prosecuted." "It all comes down to monetary loss," the special agent explained.

Realty Times, December 27, 2006