Subprime Loans and Financial Fraud
The following article is from a Federal Bureau of Investigation (FBI) news release dated 01/31/08.
Think about it, you finally get your dream home even though your credit is not good. You get a subprime loan with an adjustable rate mortgage and a few years later the interest rates go way up and you can no longer afford to pay. You spot an advertisement for a business that is willing to provide help by offering to pay your mortgage for a moderate monthly fee while you get back on your financial feet. But the devastating problem is that it is a scam and the criminals just take your money and disappear. This is just one of the latest schemes and frauds the FBI’s senior criminal investigators are seeing these days across the financial services industry.
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The FBI says that these types of frauds with mortgages and subprime loans are costing America tens of billions of dollars a year. The FBI is currently investigating 14 corporations involved in subprime lending as part of their Subprime Mortgage Industry Fraud Initiative that was launched in 2007.
The companies being investigated across the financial services industry are from mortgage lenders to investment banks that combine loans into securities that are sold to investors. Investigators are also looking into insider trading by some executives.
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The FBI is also very interested in traditional mortgage fraud and currently have more than 1,200 cases open as of January 2008, which is an increase of about forty percent from last year where these cases mostly involve fraud for profit, where groups of ’straw’ buyers, realtors, etc. create schemes to purchase properties that are flipped or allowed to go into foreclosure. The areas of most concern are California, Texas, Arizona, Florida, Ohio, Michigan and Utah.
In fiscal year 2003 the Bureau reviewed approximately 3,000 suspicious activity reports for potential mortgage fraud and by fiscal year 2007 that number had grown to 48,000. For 2008, the Bureau is on pace to receive more than 60,000 of these suspicious activity reports. In a case in November 2007 the owners of a long time Minnesota homebuilder along with a bank officer, a closing agent, and various others pled guilty to a 100 million dollar mortgage scheme involving over 200 homes. The FBI reports that right now they are not seeing any links to organized crime syndicates, street gangs, or terrorist groups in their cases.
