Mortgage Industry Filled with Fraud By Curt Anderson Associated Press Writer Posted: 12-23-04 WASHINGTON (AP) - Fraud is running rampant in the nation's mortgage industry, with nearly three times as many reports of suspicious activity so far this year compared with 2001, a top FBI official said Friday. "It has the potential to be an epidemic," said Chris Swecker, FBI assistant director for criminal investigations. Through the first nine months of 2004, mortgage companies and banks have reported more than 12,100 instances of suspicious activity compared with only 4,220 in 2001. The FBI currently has 533 pending mortgage fraud investigations, compared with 102 in 2001.Law enforcement officials say the lending and refinancing boom that accompanied record low interest rates in the past few years is a key reason for the increased fraud. The FBI has identified several "hot spots" around the country where fraud is especially prevalent, including Florida, California, Nevada, Michigan, Missouri and Illinois."You can find this anywhere in the country," Swecker told reporters. Robert M. Crouch, chairman of the Mortgage Bankers Association, said the industry has a Fraud Task Force working with the FBI to "expose these criminals and bring them to justice." "Our lenders have seen an increase in the number and variety of fraudulent schemes over the last several years committed against them," Crouch said. "It has cost the mortgage banking industry and other financial service providers billions of dollars." One common mortgage fraud scheme is "property flipping," in which property is purchased, appraised fraudulently at a much higher price and then quickly sold. The mortgage holder is then left with property worth much less than the loan it issued. Other schemes involve fake identities and credit histories, use of "straw buyers" to conceal the true buyer's name and forged loan documents. Mortgage fraud is one of several financial crimes that the FBI has been targeting for extra attention in recent months. This effort, which involves 47 FBI field offices, has resulted in more than 151 charges since early August in cases with potential losses to banks and other businesses of an estimated $3 billion. //     FBI Getting Serious About Mortgage Fraud Terry Frieden CNN Washington Bureau   CNN Washington Bureau Friday, September 17, 2004   WASHINGTON (CNN) -- Rampant fraud in the mortgage industry has increased so sharply that the FBI warned Friday of an "epidemic" of financial crimes which, if not curtailed, could become "the next S&L crisis."

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The FBI is inundated with consumer complaints of mortgage fraud. The numbers are increasing every year. Bureau spokesperson says they are trying to prevent the next S&L crisis. Assistant FBI Director Chris Swecker said the booming mortgage market, fueled by low interest rates and soaring home values, has attracted unscrupulous professionals and criminal groups whose fraudulent activities could cause multibillion-dollar losses to financial institutions. "It has the potential to be an epidemic," said Swecker, who heads the Criminal Division at FBI headquarters in Washington. "We think we can prevent a problem that could have as much impact as the S&L crisis," he said. In the 1980s, many Savings and Loans failed because of poor management, risky loans and investments, and in some cases, fraud. Taxpayers were left with a $132 billion tab to cover federal guarantees to S&L customers. The FBI has dispatched undercover teams across the country in an urgent investigation into dealings by suspect mortgage brokers, appraisers, short-term investors, and loan officers, Swecker, flanked by FBI executives and Justice Department prosecutors, revealed. In one operation, six individuals were arrested Thursday in Charlotte, charged with bank fraud for their roles in a multimillion-dollar mortgage fraud, officials said. The two-year investigation found fraudulent loans that exposed financial institutions and mortgage companies to $130 million in potential losses, they said. Also Thursday, federal agents in Jacksonville arrested two people and executed seven search warrants in connection with an alleged scheme designed to defraud banks of $22 million, officials said. The number of open FBI mortgage fraud investigations has increased more than five-fold in the past three years, from 102 probes in 2001 to 533 as of June 30 this year, the FBI said. The potential losses are staggering, and many financial institutions are cooperating with investigators. Officials noted mortgage industry sources have reported more than 12,000 cases of suspicious activity in the past nine months, three times the number reported in all of 2001. While the FBI described mortgage-related fraud as a nationwide problem, it said the levels of illegal activity are worse in some locations than in others. States identified as the top 10 "hot spots" for mortgage fraud are Georgia, South Carolina, Florida, Michigan, Illinois, Missouri, California, Nevada, Utah and Colorado. "It's bad in Georgia, the Atlanta area," said John Gillies, chief of the FBI's Financial Institutions Fraud Unit. "It was bad in the Charlotte area, but we've had a lot of undercover activity there that's helped push the problem into South Carolina." Josh Hochberg, head of the Justice Department's Fraud Section, said some organized ethnic groups are becoming involved in mortgage fraud schemes, but he declined to identify the groups. Officials said mortgage fraud is one prominent aspect of a wider problem of fraud aimed at financial institutions. The FBI said action has been taken against 205 individuals in the past month in what it described as the "largest nationwide enforcement operation in FBI history directed at organized groups and individuals engaged in financial institution fraud." In addition to mortgage fraud, "Operation Continued Action" also targeted loan fraud, check kiting, and identity theft as major problems. In one check-kiting scheme in Binghamton, New York, the operator of a recycling business wrote in excess of $1 billion in worthless checks over a 14-month period, officials said. Not all of the checks were cashed. The FBI said last week the businessman, Adam Weitsman, was sentenced to one year in prison and forfeited $1 million in assets.

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