WASHINGTON -
More than 400 real estate industry players have been indicted since March - including dozens over the last two days - in a Justice Department crackdown on incidents of mortgage fraud nationwide that stem from the country's housing crisis.
The FBI put the losses to homeowners and other borrowers who were victims in the schemes at over $1 billion.
"Mortgage fraud poses a significant threat to our economy, to the stability of our nation's housing markets and to the peace of mind of millions of American homeowners," Deputy Attorney General Mark Filip said at an afternoon news conference.
Since March 1, 406 people have been arrested in the sting dubbed "Operation Malicious Mortgage" resulting from 144 cases across the country. Sixty people were arrested on Wednesday alone, including in Chicago, Miami, Houston and a dozen other regions policed by the FBI.
Law enforcement officials said their stepped-up focus on mortgage cases aims to combat problems that have grown out of the risky lending practices prevalent until the mortgage market collapse started last year. Officials have identified 10 "mortgage fraud hotspots" nationwide in California, Colorado, Texas, Minnesota, Michigan, Illinois, Ohio, New York, Georgia and Florida.
To people who have committed fraud or are contemplating doing so, FBI Director Robert Mueller said: "We will find you, you will be investigated and you will be prosecuted."
Those named in the cases include housing developers, mortgage lenders and brokers, lawyers, real estate agents and appraisers, said Sharon Ormsby, section chief in charge of financial crimes for the FBI.
In some cases, gang, drug and organized crime investigations have resulted in mortgage fraud cases because such schemes enable criminals to launder money, Ormsby said.
Mortgage foreclosure rescue scams, which promise to help struggling homeowners stave off foreclosure and keep their homes, also have become a major problem, officials said. Typically, unsuspecting owners sign over their homes and then find they are victims of fraud.
In separate arrests, two former Bear Stearns (nyse: BSC - news - people ) managers in New York were indicted Thursday, becoming the first executives to face criminal charges related to the collapse of the subprime mortgage market.
Across the country, reports of mortgage fraud have soared over the past year as the subprime mortgage market collapsed, and defaults and foreclosures soared.
Banks reported nearly 53,000 cases of suspected mortgage fraud last year, up from more than 37,000 a year earlier and about 10 times the level of reports in 2001 and 2002, according to the Treasury Department's Financial Crimes Enforcement Network.
In recent months, the FBI has been investigating more than 1,400 mortgage fraud cases and 19 companies - including Bear Stearns - tied to the subprime mortgage crisis.
Officials declined to say who might be the next corporate target, but Mueller said the investigations focus on accounting fraud, insider trading, and failure to disclose the value of mortgage-related securities and other investments.
Under review for potential fraud are: investment banks, hedge funds, credit rating agencies, brokerage houses and due diligence firms - which evaluate loans packaged into investments.
Similar to the federal investigations of Enron Corp. and WorldCom Inc., the cases are complex and rely on intense scrutiny of documents, Mueller said.
Original Source : http://www.forbes.com/feeds/ap/2008/06/19/ap5135322.html
6 in Seattle area indicted in "Malicious Mortgage" crackdown
Six Seattle-area people have been indicted by a federal grand jury in connection with "Operation Malicious Mortgage," a national takedown on mortgage fraud schemes that has resulted in more than 400 arrests nationwide and losses estimated at more than $1 billion — nearly $8.4 million in the Seattle case alone.
Those indicted included a disbarred lawyer, a former bank loan officer and a mortgage broker, according to the U.S. attorney's office. Others include the owner of several shell corporations who "flipped" houses as part of a scheme using unqualified "straw" buyers who allowed inflated loans to be made in their names, only to default on the mortgages, the indictment alleges.
The case is among 144 prosecutions involving 406 people nationally. More than 60 arrests were made Wednesday, the Department of Justice announced.
Among them was Robert Ernest Brandt, 40, a former Bothell attorney who was disbarred in 2006 for failing to properly maintain his client escrow accounts. According to the Washington State Bar, more than $3 million turned up missing from the accounts.
The indictment alleges that Brandt conspired with several others to "flip" houses in Seattle's red-hot real-estate markets in 2004 and 2005, using the shell companies to buy the homes. The alleged conspirators would create loan papers for the straw buyers for inflated purchase prices and pay them up to $20,000 to sign the papers. The loans would not be paid and the banks would foreclose for a loss.
Also indicted were William Anderson, 47, of Bellevue; Mustafa "Marc" Khosraw, 46, of Sammamish; Isaac Palmer, 42, of North Bend; Kristyn Jupiter Moss, 38, of Tacoma; and Zachary Joseph Namie, 30, of Seattle.
Anderson purportedly operated the shell companies that purchased the homes; Moss was a loan officer at Viking Bank and helped create the fraudulent documents; and Brandt and Anderson ran a business called "Escrow Authority" that closed on the sales. Khosraw was a mortgage broker and Namie a loan officer who helped falsify documents, according to the charges. Palmer operated a construction firm, helped recruit straw buyers, and lied that some of them worked for him so they could qualify for loans, the indictment alleges.
In announcing the crackdown, Deputy Attorney General Mark Filipo said the Department of Justice is committed to prosecuting mortgage fraud, which he called "a significant threat to our economy, to the stability of our nation's housing market and to the peace of mind of millions of American homeowners."
Original Source : http://seattletimes.nwsource.com/html/nationworld/2008006720_webfraud19m.html
