Technology TransactionsMortgage Fraud Now An Organized Crime Staple
Mortgage fraud has become a staple in today"s organized crime circles.
Fraud associated with home loans first cashed in on the greed that came with the previously booming housing market, when some buyers would do anything to own a home.
The cons used falsified applications, inflated appraisals and other techniques to get home loans approved on the home buying end.
Now, mortgage fraud is taking advantage of vulnerabilities that come with the housing market"s down cycle, including homeowners, down on their luck, who face losing their homes and would do anything to avoid losing their homes.
FBI Director Robert Mueller recently testified before the U.S. Senate Appropriations panel that the "tremendous surge" in mortgage fraud investigations has been so great he has diverted agents and resources from other areas of white collar crime.
Suspicious activity reports the FBI reviews for potential mortgage fraud have grown from 3,000 in fiscal year 2003 to 48,000 in fiscal year 2007. In 2008, the FBI is on track to receive more than 60,000 such reports.
The subprime crisis will only aggravate matters, Mueller testified.
"I"m not sure at this point we can see the extent of the surge," he added.
Fraud that once primarily used inflated appraisals, "flipping" schemes and identity theft ruses to target home buying and home equity growth is now muscling in on foreclosures, reverses mortgages and subprime loans.
The FBI says known organized crime syndicates, terrorists and recognized political activists are not currently associated with mortgage fraud, but the crime does come with the hallmarks of what is considered organized crime -- collusion, conspiracy, insider cooperation and now, identity theft, one of the newest growth sectors in organized crime recognized by the FBI.
"We are investigating more than 1,300 individual mortgage fraud matters. Perhaps more importantly, we have identified 19 corporate fraud matters related to the subprime lending crisis -- cases that may have a substantial impact on the marketplace," he said.
The racketeers are also using insider trading violations connected to risky loans and the investments spun off of those loans.
On the consumer level, one of the latest cons is a bold one called "House Stealing". A con artist assumes the identity of a homeowner and transfers the deed into the con"s name or sells the home outright -- even while the owner is still living there.
A variation on House Stealing includes the con artist preying on homeowners having mortgage troubles. The con promises to refinance the mortgage, but instead buys the home using a fake identity.
Mortgage fraud hotspots include California, Texas, Arizona, Florida, Ohio, Michigan, and Utah.