FBI reports a significant jump in mortgage fraud in the previous year and some bad signs for this year. While perhaps not as great as many other frauds going on the results are not promising.
According to the Federal Bureau of Investigation’s recently released 2008 Mortgage Fraud Report, mortgage fraud Suspicious Activity Reports (SARs) referred to law enforcement increased 36 percent to 63,713 during fiscal year (FY) 2008, compared to 46,717
reports in FY 2007. While the total dollar loss attributed to mortgage fraud is unknown, financial institutions reported losses of at least $1.4 billion, an increase of 83.4 percent from FY 2007.
“Mortgage fraud hurts borrowers, financial institutions, and legitimate homeowners,” said Assistant Director Kevin Perkins, FBI Criminal Investigative Division. “The FBI, in conjunction with our law enforcement, regulatory, and industry partners, continues
to diligently pursue perpetrators of mortgage fraud schemes.”
Other key findings presented in the report include:
- Sixty-three percent (1,035) of all pending FBI mortgage fraud investigations during FY 2008 involved dollar losses totaling more than $1 million.
- More than 3.1 million foreclosure filings were reported on approximately 2.3 million properties nationally during FY 2008, up 81 percent from FY 2007 and 225 percent from FY 2006.
- As of FY 2008, the western region of the United States had the most pending FBI mortgage fraud-related investigations.
- The top 10 mortgage fraud states for 2008 were California, Illinois, Texas, Georgia, Ohio, Colorado, Maryland, Florida, Missouri, and New York.
- Rhode Island, Massachusetts, Pennsylvania, and the District of Columbia were newly identified as having significant mortgage fraud problems.
- Criminals continued using old schemes, including property flipping, builder-bailouts, short sales, and foreclosure rescues. Additionally, in response to tighter lending practices, they facilitated new schemes, such as reverse mortgage fraud, credit enhancements,
condo conversion, loan modifications, and pump and pay.
Estimated Annual Losses*: $4 billion to $6 billion
Total Mortgage Fraud Suspicious Activity Reports (SARs) in Fiscal Year 2008: 63,173, with more than $1.5 billion in losses
- So far in fiscal year 2009 (through 4/30/09): 40,901
Total FBI Mortgage Fraud Task Forces/Working Groups: 65
Pending FBI Mortgage Fraud Investigations (through 4/30/09): 2,440
Cases opened in Fiscal Year 2009 (through 4/30/09): 965 (compared to 136 in all of Fiscal Year 2004)
Successes in Fiscal Year 2008: 574 indictments/informations; 354 convictions
States with Significant Mortgage Fraud problems in 2008**: 1. Rhode Island 2. Florida 3. Illinois 4. Georgia 5. Maryland 6. New York 7. Michigan 8. California 9. Missouri 10. Colorado
* - Source: The Prieston Group ** - Source: Mortgage Asset Research Institute
The trend is predicted and is likely to spread, and provide significant resource issues for law enforcement and banks.