Entries in Mortgage Fraud (5)


2011 Was Worst Year for Suspected Financial Crimes on Record

iStockphoto/Thinkstock(WASHINGTON) -- A tidal wave of fraud reports fed by an ingenious array of scams borne out of the mortgage crisis have swamped federal offices, which are investigating and prosecuting only a small percentage of the allegations.

In 2011, suspected instances of money laundering, consumer loan fraud, debit card fraud, mortgage loan fraud, casino fraud and other scams hit all-time highs, according to suspicious activity reports known as SARs submitted to the Treasury Department's Financial Crime Enforcement Network (FinCEN).

The SAR numbers have been fluctuating between 1.2 million and 1.3 million totals since 2007, but in 2011 they jumped up to more than 1.5 million.

"The financial meltdown that took place from 2007 to 2009 uncovered all the skeletons, what was taking place in the marketplace, from mortgage financing to Ponzi schemes," said Curt Novy, a mortgage and real estate analyst based in San Diego, Calif.

While providing a fertile ground for criminals, the financial crisis also lured those who might not have ever thought to commit a crime, according to Harry Cendrowski, a fraud and forensics consultant based in Chicago.  He said having a respected person with a financial portfolio suddenly faced with financial ruin creates a "perfect storm."

Between 2007 and 2011 there was a 74 percent increase in fraud cases where people working within a financial institution exploited internal controls for their own gain, according to a study by KPMG.

"I don't hesitate to tie this into the economy," said Tim Gallagher, chief of the financial crimes section of the FBI.  "There has been a lag time from the meltdown to now."

Gallagher attributed the steep increase in money laundering and mortgage loan fraud specifically to hucksters who scammed distressed homeowners.  Mortgage loan fraud has had the most dramatic surge over the past decade, going from 9,539 in 2001 to 93,564 in 2011, according to FinCEN figures.

As the fraud peaked in 2011, however, the FBI scaled back its fraud investigations, with just 2,691 cases -- or three percent -- of the more than 90,000 suspected mortgage loan fraud cases "under investigation," according to the FBI.

"About 70 percent of our cases are more than a million dollars.  We are going after big fish as far as putting cases together, and we're going after people on the inside because of fiduciary responsibility and the element of trust that they're violating and doing the most damage," Gallagher said.

The small number of federal investigations is somewhat bolstered by state and local authorities, who can also investigate and prosecute the crimes.

Copyright 2012 ABC News Radio


SEC Wants Wells Fargo Documents for Possible Fraud Investigation

Justin Sullivan/Getty Images(NEW YORK) -- Regulators say that Wells Fargo & Co. should be forced to cooperate with an investigation into its sale of nearly $60 billion in residential mortgage-back securities after it failed to hand over documents demanded in U.S. subpoenas, Bloomberg Businessweek reports.

The Securities and Exchange Commission asked a federal judge on Friday to require the bank to submit documents it agreed to produce under subpoenas dating from September. The SEC is looking into possible fraud of the San Francisco-based company and noted that until now, the company has escaped accusations that most of its competitors have suffered since increasing mortgage defaults prompted record government bailouts of the financial system.

If the agency's request is granted, Well Fargo would have 14 days to submit 1,365 emails and attachments it has withheld from the SEC. Wells Fargo responded by saying the subpoena enforcement action is "inappropriate and unwarranted," and further stated that "the SEC staff has inaccurately described its conduct with regard to residential mortgage-back securities."

Copyright 2012 ABC News Radio 


Citibank Pays to Settle Charges of Mortgage Fraud

Chris Goodney/Bloomberg via Getty Images(NEW YORK) -- One of the nation's biggest banks agreed Wednesday to pay tens of millions of dollars to settle charges of mortgage fraud.

For more than six years Citibank's residential mortgage business engaged in what court records call "reckless lending" that cost American taxpayers millions and drove up rates of foreclosure and eviction.  Citi has now agreed to pay nearly $160 million to settle charges it "failed to implement even the most basic quality control."

Loans Citi certified as eligible for government insurance, prosecutors said, were fraudulent, deficient and "never should have been insured."

Taxpayers are paying for Citi's misconduct and prosecutors expect additional losses in the future.

Copyright 2012 ABC News Radio


New Fed Task Force Subpoenas 11 in Mortgage Fraud Probe

Mark Wilson/Getty Images(WASHINGTON) -- A new federal and state task force was created Friday to investigate mortgage fraud that contributed to the 2008 financial crisis, and the panel immediately subpoenaed 11 financial institutions.

Attorney General Eric Holder said the new unit would consist of 55 Justice Department lawyers and analysts and 10 FBI agents to work with state attorney general’s offices to investigate how mortgage backed securities were created, sold  and valued by financial institutions. The creation of the unit was announced by President Obama in his State of the Union address on Tuesday.

“The Working Group will streamline and strengthen current and future efforts to identify, investigate, and prosecute instances of wrongdoing in the packaging, selling, and valuing of residential mortgage-backed securities,” Holder said at a press conference on Friday.

Making the announcement the attorney general disclosed that the Justice Department has sent civil subpoenas to 11  financial institutions as part of the investigation. They did not identify the targets of the subpoenas.

“You can expect more to follow,” Holder said in reference to the subpoenas being sent out. “Of course, I can’t go into detail about our existing investigations.  But I can tell you that significant efforts are moving forward, by both federal and state authorities.”

The working group will be co-chaired by the heads of the Justice Department’s Civil and Criminal Division, John Walsh the U.S. Attorney from Colorado,  Robert Khuzami the SEC Enforcement Director and Eric Schneiderman the New York Attorney General.

Although the FBI, SEC and Justice Department have been investigating numerous aspects of the financial crisis, officials hope the new working group may be able to use New York State’s Martin Act, which gives investigators broad powers to investigate fraud.  The act allows New York to bring criminal and civil fraud charges without needing to show intent to commit fraud.

Copyright 2012 ABC News Radio


US Government Suing Deutsche Bank for Mortgage Fraud

Sean Gallup/Getty Images(NEW YORK) -- The U.S. government filed a lawsuit against Deutsche Bank on Tuesday, accusing the German-based bank of mortgage fraud.

According to the lawsuit, the bank repeatedly misrepresented the quality of its home loans in order to collect money from a government mortgage insurance program.

"This lawsuit sends them and other lenders the message that they cannot get away with lies and recklessness," said U.S. Attorney Preet Bharara, who filed the civil lawsuit in federal court in Manhattan.  "They cannot casually assign the prospect of being caught to the cost of doing business."

The federal government now wants Deutsche Bank to pay back the money it had to pay in insurance claims when homeowners fell behind on their mortgage payments.  The total amount in damages could surpass $1 billion.

Copyright 2011 ABC News Radio

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