There is one part of the real estate market that is booming: mortgage fraud.
“Mortgage fraud ruins lives, destroys families and devastates whole communities, so attacking the problem from every possible direction is vital,” said U.S. Attorney Joseph Russoniello.
Last year the Department of Justice, the FBI and other government agencies launched Operation Stolen Dreams to target mortgage fraudsters across the country. The project led to 485 arrests of people associated with more than $2.3 billion in losses.
Mortgage fraud takes on a variety of different crimes, from loan origination crimes to bogus foreclosure rescue schemes and loan modification scams.
“Mortgage fraud perpetrators have a high level of access to financial documents, systems, mortgage origination software, notary seals, and professional licensure information necessary to commit mortgage fraud and have demonstrated their ability to adapt to changes in legislation and mortgage lending regulations to modify existing schemes or create new ones,” the FBI report cites.
Perhaps one of the most harmful frauds comes in the form of a promise to assist people who are at risk of losing their homes to foreclosure. A federal jury earlier this year sentenced a man to 25 years in prison for running a scheme that not only bilked troubled homeowners but also scammed financial institutions.
Jeff McGrue ran an operation called Gateway International that defrauded 250 Southern California homeowners by promising to delay or prevent foreclosures and to pay off delinquent mortgages in exchange for homeowners making payments and transferring title to his company.
In reality, McGrue did not save a single home and collected about $1 million in fees and rental payments from the victims.
“This sentence will send a strong message of deterrence to scam artists and other schemers who think they can steal from desperate, distressed homeowners and get away with it,” said U.S. Attorney Andre Birotte.
But, they can often get away with it. Law enforcement agencies are shorthanded — the FBI has only 94 people nationwide fighting mortgage fraud — and being able to keep up with creative criminals is difficult at best.
That leaves the burden on homeowners to be vigilant in protecting themselves from mortgage fraud. The California Department of Real Estate says the first step is to make sure a person offering some form of assistance is indeed property licensed with the state. That can be found on the Department of Real Estate website (www.dre.ca.gov).
It is also important to get, in writing, a complete description of what services will be provided in a contract and to maintain a copy of any documents that are signed.
Also be leery of any service that requires the payment in advance of any service to be performed. And there is probably no more obvious red flag than the request to be paid in cash for services.
Because there are few signs that the real estate market will have a strong recovery anytime soon, it is likely the fraud business will continue to boom.
“The FBI assesses that the current and continuing depressed housing market will likely remain an attractive environment for mortgage fraud perpetrators who will continue to seek new methods to circumvent loopholes and gaps in the mortgage lending market,” the bureau’s report cites.