FBI Foresaw Massive Mortgage Fraud, But Did Little to Forestall It
An FBI official foresaw in 2004 that mortgage fraud was a ticking time bomb. But the agency didn’t devote enough resources to protect the nation’s economy from what has proved to be a devastating crime wave that is still growing exponentially.
Despite efforts to tighten lending standards, a survey shows that reported mortgage fraud is still rapidly rising, says the Philadelphia Inquirer. Mortgage fraud is a particular problem in major metropolitan areas, and often involves identity theft according to the article. It says reports of the crime are up 42 percent in the first quarter of 2008, compared to the same period in 2007.
Meanwhile, even though an official with the FBI told reporters in 2004 that mortgage fraud could cost the country billions, the agency failed to mount an effective defense against it, reports the Los Angeles Times.
As apparent cooperation between lender representatives, appraisers and even, in some cases, real estate agents and lawyers pursuing personal profit contributed to the mortgage fraud problem, many have blamed regulators for not watching the situation carefully enough.
But those in charge of the FBI are also to blame, for failing to devote sufficient resources to a major crime problem, according to the Times article. The FBI says it presently has about 200 agents working on mortgage fraud cases, compared to about 1,000 who were doing so during a similar, but smaller savings and loan debacle that came to a head during the late 1980s and early 1990s.
“The FBI correctly diagnosed that mortgage fraud was epidemic, but it did not come close to meeting its announced goal” of containing it, says William Black. A federal regulator during the S&L crisis, he now teaches law and economics classes at the University of Missouri at Kansas City.
“It used everyday procedures and woefully inadequate resources to deal with an epidemic,” Black says of the FBI. “The approach was certain to bring symbolic prosecutions and strategic defeat.”
Earlier coverage:
ABAJournal.com: “Attorneys Among 406 Indicted in Operation Malicious Mortgage”
ABAJournal.com: “New FBI Targets: Real Estate Brokers”
ABAJournal.com: “FBI Report: Many More Corporate, Mortgage & Securities Cases Last Year”
ABAJournal.com: “Appraiser in $41M Georgia Fraud Explains US Mortgage Meltdown”
