Feds Rev Up National Mortgage Fraud & Securities Probe
Federal prosecutors in at least five major cities throughout the country are reving up for a more expansive investigation of possible widespread fraudulent practices by mortgage lenders and investment banks.
Prosecutors in Atlanta, Dallas, Los Angeles, New York and Philadelphia, with the help of the FBI and the criminal division of the Internal Revenue Service, are looking into whether some lenders turned a blind eye to the fact that they were making loans to unqualified buyers, reports the New York Times.
And this apparently is only part of a national crackdown on mortgage fraud by the U.S. Attorney General’s Office, the FBI and the IRS, an FBI supervisor, Dean Bryant, tells the Springfield (Mo.) Business Journal.
According to the Wall Street Journal (sub. req.), prosecutors in the Eastern District of New York in Brooklyn are expanding an existing probe of potentially fraudulent mortgage lending and its effect on the securities market. As many as 15 prosecutors and investigators will be looking into possible mortgage fraud, securities fraud, insider trading and accounting fraud. Their primary focus will be mortgage lenders and Wall Street firms, the newspaper says.
One major issue: whether lenders lied to investors about the quality of their mortgage loans.
At least in Brooklyn, federal agencies involved in the investigation also include the U.S. Postal Inspection Service; U.S. Secret Service financial crimes investigators; and the Federal Deposit Insurance Corp., the WSJ writes. State agencies are also part of the probe.
“This is a look at the mortgage industry across the board, and it has gotten a lot more momentum in recent weeks because of the banks’ earnings shortfalls,” an unnamed government official tells the New York Times.
Bryant, the Missouri FBI supervisor, says investigations there have focused mainly on multiple fraudulent loan schemes in which real estate agents, mortgage brokers, builders and appraisers work together to inflate the values of properties and pocket the profit.
