Privacy Impact Assessment Mortgage Fraud - Property Flipping Database
December 28, 2005
This PIA is conducted pursuant to the E-Government Act of 2002, P.L. 107-347, the accompanying guidelines issued by the Office of Management and Budget (OMB) on September 26, 2003, and the FBI's PIA guidelines.
The Criminal Investigative Division (CID), Financial Crimes Section, Financial Institution Fraud Unit (FIFU) identifies, targets, disrupts and dismantles criminal organizations and individuals engaged in property flipping mortgage fraud schemes which target the nation's financial institutions. "Flipping" is a predatory lending practice whereby a recently acquired property is resold for a considerable profit with an artificially inflated value within a short period of time. "Flipping" is accomplished by mortgage industry insiders using "straw buyers" to defraud lending institutions, public and private investment firms and the United States Department of Housing and Urban Development (HUD) by submitting false information in mortgage applications. "Straw buyers" are provided with fraudulent documentation (i.e., W-2 forms, tax forms, false appraisals, etc.). The property is then sold at up to 500% of its true appraised value. Risk of default on these properties is significant. Lending institutions, investors, HUD, and private insurers often suffer substantial losses.
To assist in identifying "property flipping" schemes, CID's Governmental/Fraud Public Corruption Unit developed the Flip Sales Database which monitors flip sales. 1) A PIA for the Flip S ales Database was approved on 9/05/2000. The database is populated by real estate transfer records obtained from a commercial data broker. The FIFU imports transactional data into a Microsoft Access database which is copied and forwarded to FBI field offices via CD-ROM. 2) Pursuant to a contract, a commercial data broker identifies and provides transactions (by state) which meet certain criteria established by the FBI as indicative of property flipping. In addition to holding transactional data, the system contains the state and municipality where the transaction occurred, the parcel number, tax ID number, names and addresses of buyers and sellers, names of lender, dates of transactions, and property values. As originally envisioned, information would not be retrieved by personal identifier, but by percentage in real estate transactions.
The FIFU has determined that the current practice of importing public source data into a Microsoft Access database and copying and forwarding CD-ROMs to all FBI field offices is extremely inefficient and time consuming. In addition, the FIFU advises that the database does not allow it to conduct regional and national searches of mortgage data, which has hampered its ability to identify "property flipping" patterns and "connect the dots" of fraudulent schemes. Lastly, FBI personnel have been unable to export pertinent data from the database to create their own specialized reports. Accordingly, the FIFU has requested that the FBI's Information Technology Operations Division, Headquarters Software Development Unit develop a Property Flipping Database which will reside on the FBI's intranet. In addition to the real estate transactional data referenced above, the system will also include foreclosure information and notices of loan default imported from the commercial data broker. Information contained in the current Microsoft Access Flip Sales Database will also be incorporated into the new "Property Flipping Database." The Property Flipping Database will allow FBI personnel who investigate mortgage fraud to conduct more robust searches of the database (i.e., by name or personal identifier, as well as percentage increases in real estate properties bought and sold) and analyze property flipping data. Ultimately, with the enhanced search capabilities of the new "Property Flipping" database, FBI personnel will be able to more readily identify property flipping patterns and schemes.
A. What information is being collected?
The Property Flipping Database will contain the personal identifying public source information of individuals who are related to transactions which meet certain criteria established by the FBI as indicative of property flipping. Personal identifying information such as name, tax ID number, address, buyer and seller information, foreclosure information, notice of eviction, market appraisal analyses, proof of occupancy, and notice of default. The database will also contain information concerning the state and municipality where the transaction occurred, parcel number, loan type, transfer date, value of property, as well as lender information.
B. Why is the information being collected?
The information is being collected to assist FBI personnel in identifying property flipping patterns and schemes.
C. What is the intended use of the information?
The personal identifying information of individuals and other mortgage related data will be used to monitor, identify and investigate property flipping patterns and schemes.
D. With whom will the information be shared?
Information may be shared with federal, state or local law enforcement agencies during the course of mortgage fraud investigations as authorized by law. However, direct access to the database will be restricted to FBI personnel, contractors and detailees.
E. What opportunities will individuals have to decline to provide information or to consent to particular uses of the information?
With respect to information from the commercial data provider, the original sources of the data may or may not, according to their own policies and procedures, provide individuals with notice that the data may be shared with law enforcement. Otherwise, information is gathered by the FBI during the course of routine lead checking and investigations, including gathering evidence, interviewing witnesses, subjects, executing search warrants, etc. As such, individuals are not provided with an opportunity to decline to provide information or consent to the particular uses of the information.
F. How will the information be secured?
Access to the Property Flipping Database will be limited to FBI personnel, contractors, and detailees investigating property flipping schemes and will be restricted by password. Physical security protections include guards and locked facilities requiring badges and passwords for access. Records are accessed by authorized personnel and are protected by appropriate physical and technological safeguards to prevent unauthorized access.
G. Is this a system of records?
Yes, the Property Flipping Database will contain personally identifiable information regarding individuals, and information will be retrieved by name or personal identifier. The Property Flipping Database will be part of the FBI's Central Records System. Thus, a new Privacy Act systems notice is not required.
H. What are the alternatives to collection and handling as designed, the appropriate measures to mitigate risks identified for each alternative, and the rationale for the final design choice?
The FIFU determined that its current practice of importing public source data into a Microsoft Access database and copying and forwarding CD-ROMs to FBI field offices is extremely inefficient and time consuming. Furthermore, the FIFU determined that because the current database does not permit FBI personnel to conduct meaningful searches of its data, continued use of the database will hamper the FBI's ability to identify property flipping patterns and schemes. The new database will allow this functionality, but still protect privacy by having access controls, security controls, etc. Thus, continuing with the current database is not considered a viable alternative. Accordingly, the FIFU has decided to proceed with the development of the database.
As a result of conducting the PIA, the Senior Privacy Official has determined that the FIFU must work with OGC's Investigative Law Unit to develop criteria for the retention of records concerning individuals whose property purchase may meet the FBI's criteria, but who are subsequently determined to not be parties to fraudulent property-flipping transactions. The establishment of such criteria will mitigate the risks associated with the collection of the information.
1. The project was initially sponsored by the Governmental Fraud/Public Corruption Unit, but was transferred to the FIFU in June of 2004.
2. As originally envisioned, the Flip Sales Database was to reside on the FBI's intranet; however, the FIFU advises that the database cannot be accessed via the intranet.
3. This position is currently held by Deputy General Counsel Patrick W. Kelley.