- Mortgage fraud continued at elevated levels in 2010, consistent with levels seen in 2009. Mortgage fraud schemes are particularly resilient, and they readily adapt to economic changes and modifications in lending practices.
- Prevalent mortgage fraud schemes reported by law enforcement and industry in FY 2010 included loan origination, foreclosure rescue, real estate investment, equity skimming, short sale, illegal property flipping, title/escrow/settlement, commercial loan, and builder bailout schemes. Home equity line of credit (HELOC), reverse mortgage fraud, and fraud involving loan modifications are still a concern for law enforcement and industry.
- Mortgage fraud perpetrators include licensed/registered and non-licensed/registered mortgage brokers, lenders, appraisers, underwriters, accountants, real estate agents, settlement attorneys, land developers, investors, builders, bank account representatives, and trust account representatives.
- Total dollar losses directly attributed to mortgage fraud are unknown.
Total dollar losses attributed to mortgage fraud are unknown; however, law enforcement and mortgage industry participants have attempted to quantify them in recent years. According to CoreLogic (see Appendix A for source description) more than $10 billion in loans originated with fraudulent application data in 2010 (see Figure 1).4And that's just in one year.
Who, precisely is involved in this? According to FBI profiling, your mortgage fraud criminals include the following:
Mortgage fraud perpetrators include licensed/registered and non-licensed/registered mortgage brokers, lenders, appraisers, underwriters, accountants, real estate agents, settlement attorneys, land developers, investors, builders, bank account representatives, and trust account representatives. There have been numerous instances in which various organized criminal groups were involved in mortgage fraud activity. Asian, Balkan, Armenian, La Cosa Nostra,2 Russian, and Eurasian3 organized crime groups have been linked to various mortgage fraud schemes, such as short sale fraud and loan origination schemes.A true melding of white-collar, organized and street level criminals. You've got your dons (Wall Street, Big Mortgage, Big Banking), your capos (the lawyers, accountants and investors who give the orders) and your muscle (the underwriters, real estate agents, document mills, and foreclosure goons) all conspiring to pinch Joe Homeowner.
It's easy to get lost in the report's exhaustive analysis of the extent of the fraud being perpetrated today, but for this reader, the "current schemes and techniques" section is the most alarming reading.
An analysis of FBI reporting revealed that the most prevalent mortgage fraud schemes identified in FY 2010 included loan origination schemes (to include property flipping), followed by settlement-related schemes (to include kickbacks, title/escrow/settlement fraud, and non-satisfaction of mortgage scams), real estate investment schemes, reverse-mortgage scams, short sale schemes, commercial real estate loan frauds, foreclosure rescue schemes, advance fee schemes, builder bailout schemes, equity skimming schemes, and bankruptcy fraud.LOL. I guess the better question is, who in the mortgage industry isn't looking for a piece of the action?
The report (brilliantly) lays out exactly how these crimes are being perpetrated in an almost "buyer beware" easy-to-read language. Anyone who either owns property or is thinking of buying property should read every single word of this document.
More importantly, though the report trumpets "Operation Stolen Dreams" and its statistics (1,215 criminal defendants, 485 arrests, 673 indictments, 336 convictions...defendants were allegedly responsible for more than $2.3 billion in losses), it's worth noting that very few of these represent the Godfathers (CEO's and other executives of Big Mortgage and Big Banking) who brought the economy down in the years leading up to 2008. More likely, these defendants represent the "street" level wiseguys in the massive white-collar criminal enterprise that is mortgage fraud today.
And frankly, until the FBI decides to decapitate the monster, and we see more suits and ties being frog-marched out of office buildings on Wall Street, the country is fighting a losing battle.
As any student of organized crime can tell you, the muscle is expendable; thugs are a dime a dozen. It's the dons you have to take out in order to kill the beast.