Losses to the mortgage industry have recently totaled more than $600 million, according to a new government report.
From July 5, 2005, until Oct. 27, 2005, the mortgage industry lost $606 million from active mortgage fraud cases, according to a joint announcement today from the FBI, HUD, the Postal Inspection Service and the IRS. In coordination with the Department of Justice, 156 mortgage fraud suspects were indicted, 81 people were arrested, 89 people were convicted and 60 people were sentenced during the period.
The activity was the result of Operation Quick Flip, an ongoing initiative “designed to show that federal law enforcement recognizes the mortgage fraud threat,” the statement said. “The federal agencies involved are targeting mortgage fraud groups in order to disrupt and dismantle them permanently.”
During all of fiscal 2005, the FBI said it has filed 206 indictments/informations and convicted 170 people, compared to 241 and 172, respectively, during 2004.
“Mortgage Fraud is one of the fastest growing white collar crimes” in the country, the statement said. It “is defined as a material misstatement, misrepresentation, or omission relied upon by an underwriter or lender to fund, purchase, or insure a loan.”
The FBI noted fraud for profit, which involves industry professionals, generally includes multiple transactions with several lenders. The insider creates fake verifications and documentation to trick the lender into approving the transaction. This type of fraud reportedly makes up 80 percent of all real estate finance fraud.
Fraud for property or fraud for housing usually involves a lying borrower who intends to repay the loan and may have been coached by an insider. This group reportedly accounts for 20 percent of loan fraud.
The FBI said nearly 22,000 suspicious activity reports have been filed during fiscal 2005, up from over 17,000 in fiscal 2004. While the FBI currently has 721 pending fraud cases, HUD’s Office of the Inspector General has 1,020 cases pending.
The states cited as the hottest fraud spots were California, Nevada, Utah, Arizona, Colorado, Missouri, Illinois, Maryland, Georgia, and Florida.
