The FBI and Department of Justice formulated Operation Malicious Mortgage (OMM) in response to the rapidly escalating mortgage fraud crime problem. This initiative was a multi-agency, coordinated national mortgage fraud effort. From March 1, to June 18, 2008, Operation Malicious Mortgage resulted in 144 mortgage fraud cases in which 406 defendants were charged, convicted or sentenced On June 18, 2008, sixty (60) arrests, nationally, were conducted. The FBI estimates that approximately $1 Billion in losses were inflicted by the mortgage fraud schemes employed in these cases.
On June 18, 2008, as part of the Operation Malicious Mortgage initiative, the Dallas FBI executed arrest warrants on eight (8) of eleven (11) individuals sought in a mortgage fraud scheme. As reported yesterday, these individuals were Eric Rulack Farrington, Jr., Regis Lamont Williams, Kevin Ray Sanderson, Tony Earl Anderson, James Edward Jones, Edwin Terrence Bell, Robert John Mason and Christopher N. Williams. Today, a ninth individual, Michael Lewis Andrews, surrendered himself to federal authorities.
Data collected from the FBI, other law enforcement, and industry sources were compared to determine which states were most affected by mortgage fraud in 2007. The top 10 mortgage fraud states for 2007 were identified as follows: Florida, Georgia, Michigan, California, Illinois, Ohio, Texas, New York, Colorado and Minnesota.
Forty One (41) Mortgage Fraud Task Forces or Working Groups addressing Mortgage Fraud have been created. The North Texas Mortgage Fraud Working Group is one of the forty one (41).
The following agencies participate in the North Texas Mortgage Fraud Working Group:
- FBI Dallas
- Internal Revenue Service (IRS)
- Housing and Urban Development, OIG (HUD-OIG)
- U.S. Secret Service (USSS)
- U.S. Postal Inspection Service (USPIS)
- Federal Deposit Insurance Corporation (FDIC)
- Bureau of Immigration and Customs Enforcement (BICE)
- Texas Attorney General’s Office
- Dallas County District Attorney
- Tarrant County District Attorney
- Collin County District Attorney
- Rockwall County District Attorney
- Denton County District Attorney
- Kaufman County District Attorney
- Ellis County District Attorney
- Texas Department of Insurance
- Texas Appraisal and Licensing Board
- Texas Real Estate Commission
Each mortgage fraud scheme contains some type of material misstatement, misrepresentation or omission relied upon by an underwriter or lender to fund, purchase or insure a loan. The most common form of mortgage fraud involves illegal property flipping which entails false appraisals and other fraudulent loan documents. Many mortgage fraud schemes are based upon or incorporate some form of illegal property flipping. Emerging and re-emerging schemes in 2007 included builder-bailouts, seller assistance, short sales, foreclosure rescue and identity thefts exploiting home equity lines of credit.
What should homeowners do to avoid these schemes?
- Get referrals for real estate and mortgage professionals. Check the license of the industry professional with state, county or city regulatory agencies.
- If it sounds too good to be true, it probably is. An outrageous promise of extraordinary profit in a short period of time signals a problem.
- Be wary of strangers and unsolicited contacts, as well as high-pressure sales techniques.
- Look for written information to include recent comparable sales in the area, and other documents such as tax assessments to verify the value of the property.
- Understand what you are signing and agreeing to. If you do not understand, re-read the documents, or seek assistance from an attorney.
- Make sure the name on your application matches the name on your identification.
- Review the title history to determine if the property has been sold multiple times within a short period. It could mean that this property has been “flipped” and the value falsely inflated.
- Know and understand the terms of your mortgage. Check your information against information in the loan documents to ensure they are accurate and complete.
- Never sign any loan document that contains blanks. This leaves you vulnerable to fraud.
Robert E. Casey Jr., Special Agent In Charge, Dallas, FBI, provided the above information for background purposes.