WASHINGTON (2/29/12)--Mortgage and financial institution fraud were two of the high priority issues investigated by the Federal Bureau of Investigation's (FBI) White-Collar Crime program in 2011, the agency reported.
The FBI in its Financial Crimes Report to the Public covered trends in financial crime in the 2010 and 2011 fiscal years. The report describes trends in corporate fraud, securities and commodities fraud, healthcare fraud, insurance fraud, mass marketing fraud, and money laundering.
While the FBI said it continues to consider loan origination fraud to be the "most egregious type of mortgage fraud because of the high dollar losses" associated with it, the report noted that distressed homeowner fraud has displaced loan origination fraud as the number one mortgage fraud threat investigated in many FBI offices.
The agency noted these schemes, which victimize troubled homeowners, can take the form of false foreclosure rescue and loan modification programs, and mortgage debt elimination schemes.
In foreclosure rescue schemes, criminals mislead homeowners into believing they can save their home by transferring the deed or putting the property in the name of an investor. The perpetrators then sell the property to a third party investor or use a so-called "straw borrower" to purchase the home, create equity using a fraudulent appraisal, and steal the seller proceeds or fees paid by the homeowners, the FBI said.
While some of these foreclosure avoidance firms tell the former homeowners they may rent the home until they are in good enough financial condition to buy it back, the new homeowners often stop paying their mortgage, and the home goes back into foreclosure, the FBI added.
Loan modification schemers often ask homeowners to pay up-front for loan modification help, and either negotiate unfavorable terms for their clients or do not negotiate on behalf of their clients at all.
Overall, the FBI has continued to dedicate significant resources to mortgage fraud cases, and has increased the total number of agents investigating these cases to 325 in 2011. Only 120 agents investigated these cases in 2007. The agency had 2,691 pending mortgage fraud cases in 2011, and the FBI's investigative actions resulted in $1.38 billion in restitutions and $116.3 million in fines being paid in fiscal 2011.
The FBI said its financial institution fraud investigations often uncover organized criminal groups that take part in the sale and distribution of stolen and counterfeit corporate checks, money orders, payroll checks, credit and debit cards, U.S. Treasury checks, and currency.
One fraud case outlined in the report was the St. Paul Croatian FCU case. In that case, former CEO Anthony Raguz allegedly issued more than 1,000 fraudulent loans to more than 300 account holders between 2000 and 2010, and allegedly accepted more than $500,000 in bribes, kickbacks and gifts from people obtaining the fraudulent loans. (See related News Now, Feb. 28 story: Woman gets a day in prison in St. Paul Croatian fraud)
The scheme resulted in the credit union being placed into conservatorship in April 2010, and ultimately cost the National Credit Union Share Insurance Fund $170 million in losses.
Raguz plead guilty to federal charges earlier this year and will be sentenced on June 11. A number of other co-defendants are also being sentenced for their roles in the fraud ring.
For more of the FBI crime report, use the resource link.