Posted on: Wednesday, January 20, 2010

Fraud Battle Intensifies

By Paul M. J. Suchecki
Tags: mortgage fraud, Nationwide Mortgage Licensing System, NMLS, ...
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In testimony Thursday at the Financial Crisis Inquiry Commission, Attorney General Eric Holder stated that the FBI is investigating more than 2,800 mortgage fraud cases, more than five times the 534 investigations in 2004. ”When we find businesses or individuals whose disregard for the law has hurt the pocketbooks of average Americans, we will use every available measure to hold them accountable,” Mr. Holder stated.

Most of the cases, 1,842, involved more than $1 million in losses. As of November, federal mortgage fraud charges were pending against 826 defendants. Lanny A. Breuer, the Department of Justice’s Assistant Attorney General for the Criminal Division, explained that the cases include foreclosure rescue schemes, loan modifications, mortgage origination and property flipping schemes. “Mortgage fraud has swept through our economy,” Breur told the commission. Those under investigation include real estate brokers, appraisers, bankers, borrowers and “plain old fraudsters who gravitated to mortgage fraud.”

Breuer said that since the mortgage meltdown began, authorities had gotten more than 70,000 “suspicious activity reports” regarding mortgage fraud alone. He added that law enforcement is not just looking at the lenders who made iffy mortgagees, but the financial firms that packaged the home loans as securities. 2100 securities fraud investigations are in the works.

Most of the investigations are against smaller entities. Last year the Department of Justice lost the only criminal case it brought against a major Wall Street firm for mortgage fraud, having its case dismissed against two Bear Stearns hedge fund managers. Securities and Exchange Commission Chair Mary Shapiro told the commission that the SEC is still pursuing a fraud case against the managers in civil court where it hopes to meet the lower “preponderance of evidence” standard compared to the “beyond reasonable doubt” criteria of criminal court.

This Monday, January 25th , prospective mortgage borrowers will have a handy tool to help them check on the legitimacy of home loan originators. The database for the Nationwide Mortgage Licensing System, NMLS, will be available online to mortgage shoppers. The database will verify whether or not a mortgage loan originator is licensed and provide a loan originator’s employment history going back ten years.

The free site was set up in response to the Secure and Fair Enforcement for Mortgage Licensing, SAFE, Act of 2008 which established requirements for the licensing and registration of all mortgage loan originators. The SAFE act requires them to pass a written qualified test, to complete pre-license courses, and to take annual continuing education after submission of fingerprints to NMLS for a criminal background check by the FBI. Under the SAFE Act, a mortgage originator convicted of a felony is barred from holding a license for seven years. If the crime involves financial fraud, the felon is banned for life.

Although some states have maintained lists of mortgage originator convictions within their own jurisdiction, for the first time borrowers in one state will be able to see whether or not a loan originator had his license suspended or revoked out of state. The information is updated nightly.

Mortgage Outreach.org offers a comprehensive guide to steering clear of mortgage rescue scams. For details click here.