Brokers said to limit loan fraud crackdown

December 18, 2005|By ANDREW ZAJAC | ANDREW ZAJAC,CHICAGO TRIBUNE

WASHINGTON -- A crackdown on mortgage fraud by federal law enforcement agencies will have limited impact without better self-policing by the home-sales industry, including more information from mortgage brokers about suspicious activity, a top FBI official said last week.

Unlike lenders, mortgage brokers are not required to report questionable transactions to the government. "I would question whether they're exercising as much due diligence as we would like to see," said Chris Swecker, FBI assistant director in charge of the criminal division.

Swecker and representatives of the IRS, the Postal Service and the departments of Justice and Housing and Urban Development held a press briefing to discuss recent efforts to curb mortgage fraud.

Between July and October, a joint federal effort resulted in 156 indictments, 89 convictions and the breakup of schemes that cost the housing industry $600 million, according to bureau figures.

In a typical mortgage fraud scheme, a person uses false identification to secure a loan that he or she does not intend to repay.

One of the fastest-growing types of white-collar crime, mortgage fraud has surged in recent years thanks to record low interest rates, a hot home-buying market and a huge number of refinancings.

"It's been a perfect storm," said Andre Martin, director of operations, policy and support for the IRS.

According to FBI statistics, the number of mortgage convictions has dropped to 170 in 2005 from 256 in 2003. But the dollar value of those cases increased to $1 billion this year, compared with $225 million in 2003.

Officials said this reflected decisions in the FBI after the Sept. 11, 2001, attacks to focus on fewer but higher-value criminal cases, so that more resources could be devoted to thwarting terrorism.

In the past, some mortgage industry groups have opposed mandatory fraud reporting, saying it will raise loan costs and choke off credit to homeowners who most need it. But National Association of Mortgage Brokers President Jim Nabors said Wednesday that his group would support such a measure. "We want fraud reported and whoever's committing it out of our industry and prosecuted," Nabors said.

Andrew Zajac writes for the Chicago Tribune.

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