By Sally Greenberg, NCL Executive Director
BRAVO to the Department of Justice, which has arrested 500 people involved in scamming homeowners into believing they would save their homes. In announcing its effort to stop the scammers, “Operation Malicious Mortgage,” Attorney General Eric Holder described the fraud as “…truly astonishing.” What is interesting about this latest investigation is that it targets some of the smaller operators, not the big Wall Street operators involved in subprime loans. One fraudster was sentenced to 22 years in prison for stealing $400,000 from homeowners who were told they were refinancing their homes but were tricked into selling them.
DOJ says the number of mortgage fraud cases reported to DOJ has risen 5 percent in 2009. I think it’s terrific that the FBI has been put to work on stopping these frauds; the Wall Street Journal reports that investigations into mortgage fraud has more than doubled to 3,000 in 2009.
The FBI can do things we can’t at NCL’s Fraud Center, which logs more than 15,000 complaints each year and sends them to local state and federal law enforcement. For example, the FBI worked with a tax preparer turned informer who recorded conversations with mortgage brokers, real estate agents and others who purchased fake pay stubs, tax returns, and other documents used to inflate income of homeowners so they could obtain bigger mortgages. This group was able to secure $15 million in fraudulent loans. In another case, several fraudsters appealed to Haitian immigrants, using their personal information to apply for mortgages without the victims’ notice.
These are precisely the kind of stings – complete with arrests and hefty prison sentences – that the Department of Justice and FBI should be focused on. One arrest and conviction is a loud warning to other scammers that they’d best change their ways or they too will end up behind bars.