- Kevin Perkins
- Associate Deputy Director
- Federal Bureau of Investigation
- Press Conference Announcing Results of Distressed Homeowner Initiative
- Washington, D.C.
- October 09, 2012
PLEASE NOTE: The information below inadvertently reflects inaccurate figures. An extensive review of the reported cases concluded that, contrary to the figures contained in the initial announcement, the initiative resulted in 107 criminal defendants charged in U.S. District Courts across the country. These cases involved more than 17,185 homeowner victims and total losses by those victims estimated by law enforcement at more than $95 million. In federal civil actions involving distressed homeowner victims, the Justice Department’s U.S. Trustee Program, the Federal Trade Commission and the Consumer Financial Protection Bureau (CFPB), protectors of the nation’s bankruptcy laws and federal consumer laws, filed cases against 128 defendants in federal cases across the country, with at least 19,198 victims identified and losses estimated at more than $54 million.
The discrepancy occurred due to the fact that the original figures included in the Distressed Homeowner Initiative materials included not only criminal defendants who had been charged in fiscal year 2012, but also a number of defendants who were the subject of other prosecutive actions—such as a conviction or sentencing—in fiscal year 2012. In addition, the announcement included a number of defendants who were charged in mortgage fraud cases in which the victim(s) did not fit the narrow definition of “distressed homeowner” that the initiative targeted.
Combating mortgage fraud continues to be a priority for the FBI. We recognize the negative impact that mortgage fraud and foreclosures have on our economy and on our communities.
Mortgage fraud perpetrators are resilient. They adapt their schemes to changes in economic conditions and in lending practices.
In a thriving economy, loan origination fraud schemes are most prevalent. In a down market—when lending standards tighten and defaults and foreclosures rise—schemes targeting distressed homeowners become more common. These schemes include foreclosure rescue, loan modification, short sale, and bankruptcy fraud.
Distressed homeowner schemes have displaced loan origination fraud as the most common type of mortgage fraud in many areas of the country. Two years ago, less than 4 percent of the FBI’s mortgage fraud cases involved distressed homeowner fraud. Today, more than 20 percent of all mortgage fraud cases involve distressed homeowner fraud.
Last October, the FBI—a co-chair of the Financial Fraud Enforcement Task Force Mortgage Fraud Working Group—launched the National Distressed Homeowner Initiative to confront these new schemes.
In contrast with previous initiatives, where the fraud victims primarily were lenders, the focus here is on individual homeowners—many times are at their most vulnerable point.
This initiative combines the resources of our federal, state, and local law enforcement partners, as well as regulatory agencies. Together we are targeting the most egregious offenders throughout the country.
In the past, mortgage fraud was viewed as a crime that was investigated only after the fraud had been committed and the victims had suffered losses. But today, we know we must use intelligence and sophisticated techniques to find and stop these criminals before they take action.
These techniques include court-approved electronic intercepts, undercover operations and consensually recorded conversations, the infiltration of criminal enterprises through search warrants and mail covers, and information from confidential human sources.
Based on our intelligence, we identified the greater Los Angeles area—including Los Angeles, Orange, and Riverside Counties—as the epicenter for most of the criminal activity involving distressed homeowner fraud.
In response, this past May, the FBI assembled a multi-agency Distressed Homeowner Strike Force in Los Angeles. As we speak, federal, state, and local law enforcement officers are executing search warrants for several businesses in Orange County, California.
The National Distressed Homeowner Initiative has had a substantial impact. We have shut down or disabled numerous companies, with an estimated 73,000 victims of fraud and losses of more than $1 billion. We have charged 530 criminal defendants.
We will continue to work with our partners to shut these companies down and bring these criminals to justice. Together, we can ensure the integrity of the housing market and keep our communities safe.
Now, I’ll turn it over to Jon Leibowitz, chairman of the FTC.