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War against mortgage fraud may be failing

Posted on February 19, 2010 3:00 AM EST

The federal agency called the Financial Crimes Enforcement Network released a report showing that suspicious activity related to mortgage fraud climbed 7.5% in the third quarter of 2009. The report covers July 1, 2009 to September 30, 2009. Again, California and Florida led the pack in terms of states being linked to mortgage fraud. The cities with the highest rates of suspicious activity continue to be Miami, Los Angeles and New York. Financial institutions and banks are required to file suspicious activity reports (SARs) when they suspect or actually catch a mortgage scheme to defraud. The reporting requirement comes from the Bank Secrecy Act. The report may be skewed as some of the SARs covered cases that were more than a year old and just reported during the aforementioned dates. Some of the suspicious activities were in fact more than two years old and just reported late.

An interesting part of the report set forth the prospect that new types of mortgage fraud are being committed. Hundreds of reports are coming in that loan modification fraud and foreclosure rescue scams may just be the beginning of a new type of real estate fraud the feds will start investigating. While mortgage fraud cases may be drying up for Miami criminal defense attorneys, these new types of fraudulent activities will provide new types of cases for criminal law firms. The two most common schemes according to the report are as follows. The first being cases where distressed homeowners were tricked into signing quitclaim deeds to straw buyers and the homeowners received eviction notices anyway. The second scheme involved individuals taking money from homeowners with the promise to seek loan modifications, when in fact all they did was take the money and run.

The recently created mortgage task forces are completely overwhelmed investigating typical mortgage fraud cases. The cases are very complex and take months if not years to thoroughly investigate. The lengthy criminal investigations result from the large number of individuals and different levels of fraud that need to be looked at when conducting a thorough investigation. Another reason why the investigations take so long is that the feds have to subpoena and review thousands of documents before questioning individuals suspected for the involvement in the case. Once the documents are reviewed federal investigators attempt to speak with or arrest anyone whose names can be found on the documents. If you are contacted by federal investigators who want to discuss real estate transactions, it is imperative to contact a criminal law firm that has experience in defending real estate fraud cases in federal court.

Anyone arrested for their involvement in real estate fraud will be charged with wire fraud, mail fraud and racketeering. The penalties one faces under the federal sentencing guidelines depends mostly on the loss suffered by the financial institutions who lent money to fraudulent buyers and sellers. Penalties can range from supervised release to long prison sentences depending on the loss. Even one fraudulent transaction where an individual signs a HUD1 seeking credit from a bank can go to prison if the loss amount is enough.

Mortgage Fraud Reports Up 7.5 Percent, US Agency Says, Reuters, February 18, 2010.
Categories: Fraud