2008 Mortgage Fraud Report

July 10, 2009

FBI Supervisory Special Agent Brian Weber discusses the continued escalation of mortgage fraud as detailed in the 2008 Mortgage Fraud Report.

Audio Transcript

Mr. Schiff: Hello I’m Neal Schiff and welcome to Inside the FBI, a weekly podcast about news, cases, and operations. Mortgage fraud isn’t going away anytime soon. Be alert if you’re buying a house or refinancing.

Mr. Weber: “If something seems too good to be true, it probably is.”

Mr. Schiff: That’s Brian Weber. He’s a supervisory special agent on the FBI’s Mortgage Fraud Team. And he’s got a copy of the 2008 Mortgage Fraud Report just released by the FBI.

Mr. Weber: “It details mortgage fraud activities in the United States during 2008.”

Mr. Schiff: What do the numbers show when you compare mortgage fraud from 2007 to 2008?

Mr. Weber: “Well those numbers show that mortgage fraud is and continues to be an escalating problem in the United States.”

Mr. Schiff: How much of an escalation?

Mr. Weber: “One thing that the FBI looks at is Suspicious Activity Reports detailed and filed by banks. During 2008, those increased 36 percent to 63,713 reports in 2008. That’s up from 46,717 in 2007.”

Mr. Schiff: How much money involved in mortgage fraud?

Mr. Weber: “Well it’s hard to say the total dollar loss attributed to mortgage fraud. But 63 percent, or 1,035, of all FBI pending mortgage fraud investigations or cases include estimated dollar losses totaling more than $1 million each.”

Mr. Schiff: How serious is mortgage fraud around the country right now in these economic times?

Mr. Weber: “Mortgage fraud is extremely serious, and as I said, it is an escalating problem. With the total dollar losses in mortgage fraud related to both FBI cases and financial institution reports; when it comes to financial institutions, they’ve reported losses of at least $1.4 billion, an increase of 83.4 percent from fiscal year 2007 .”

Mr. Schiff: What about pending cases and statistics?

Mr. Weber: “FBI cases, pending cases, continue to rise as well last year to a total of 1,644 cases during 2008, at the end of 2008.”

Mr. Schiff: Do we have what the figures were at the end of 2007?

Mr. Weber: “Yes in 2007 we had 1,204 cases. And at the end of 2008 we had 1,644 cases.”

Mr. Schiff: How about foreclosures?

Mr. Weber: “Foreclosures posted big numbers last year with more than 3.1 million foreclosure filings on approximately 2.3 million properties nationally during 2008. This was up 81 percent from the previous fiscal year 2007 and up 225 percent from the previous fiscal year 2006.”

Mr. Schiff: The FBI’s 2008 Mortgage Fraud Report also breaks these crimes down by region and areas where much of this activity has been going on.

Mr. Weber: “Most of the FBI cases, or a significant amount of those cases, are concentrated in the western region of the United States. The top ten states for mortgage fraud in 2008 were California, Illinois, Texas, Georgia, Ohio, Colorado, Maryland, Florida, Missouri, and New York.”

Mr. Schiff: What are some of the types of mortgage fraud that we’re seeing out there now?

Mr. Weber: “Well criminals are continually using old schemes and adapting to new schemes. Some of the old schemes they’re using include property flipping, builder bailouts, short sales, foreclosure rescue schemes. Additionally, in response to tighter lending practices, they have facilitated new schemes. Some of these schemes include reverse mortgage fraud, credit enhancements, condo conversion schemes, loan modifications, and pump and pays.”

Mr. Schiff: You really want to be on your guard in case someone tries to reel you in.

Mr. Weber: “Property flipping are the traditional mortgage fraud practices whereby people will purchase properties, falsely inflate the value of that property, sell that property to a straw buyer, and obtain a loan from a bank worth far more than the actual value of the house. Builder bailout schemes are tied, in some cases, to builders with excess inventories of property. These schemes can involve builders simply committing frauds to sell that excess inventory. Short sale schemes and foreclosure rescue schemes involves schemes perpetrated, largely capitalizing on the big, big increase in foreclosures in the past couple of years. Another is a loan modification scheme. These typically take the form of an advance fee scheme. Essentially a homeowner facing foreclosure is approached and told by the perpetrator that their home loan can be negotiated down in exchange for a fee. In most of these cases, in a lot of these cases, the individuals charge between $1,500 and $5,000 to negotiate the loan on behalf of the victim homeowner. When in reality no negotiations are done and that money is just taken in the form of an old-school advance fee scheme.”

Mr. Schiff: How can honest citizens prevent becoming victims of mortgage fraud and even foreclosures?

Mr. Weber: “Well, honest citizens, when they’re buying property, they should use referrals to real estate professionals that they know, or friends or co-workers have used. You should always be careful that if something seems too good to be true, it probably is. And most importantly, when faced with the prospect of a housing deal or a real estate prospect, either home sellers or home buyers should be aware that if something does in fact seem too good to be true, it most likely is.”

Mr. Schiff: Good idea to read all the paperwork, even the fine print?

Mr. Weber: “Absolutely. Read all the paperwork. If you’re confused on anything, make sure that you ask questions. If you still don’t understand it, hire an attorney or another real estate professional, and always, always read the fine print, and read every page of paperwork that you sign.”

Mr. Schiff: The FBI’s Internet page has a lot of information on mortgage fraud investigations, reports, and more. Surf over to www.fbi.gov. That concludes our show. Thanks for listening. I’m Neal Schiff of the FBI’s Office of Public Affairs.

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