The FBI and DOJ recently announced a national takedown of mortgage fraud schemes, resulting in 144 mortgage fraud cases in which 406 defendants were charged. The cases cover every region of the United States, and involve United States Attorneys’ offices in 50 judicial districts. This cooperative, cross-jurisdictional effort is estimated to have targeted schemes accountable for approximately $1 billion in mortgage losses. The wide ranging investigation, known as Operation “Malicious Mortgage,” was active from March through June of this year. However, all indications are that this is an initiative that the government intends to maintain as a primary law enforcement objective, particularly as the worsening economy continues to come under pressure from the downturn in the housing market.
Operation “Malicious Mortgage” is an initiative that has also been linked with securities fraud as interrelated priorities for federal law enforcement. In the same press release announcing Operation “Malicious Mortgage,” the FBI noted that on the same day the United States Attorney’s Office for the Eastern District of New York had indicted two Bear Stearns hedge fund managers for securities fraud related, in part, to mortgage-backed securities. In commenting on these parallel actions, Deputy Attorney General Mark R. Filip, chair of the President’s Corporate Fraud Task Force, stated that “mortgage fraud and related securities fraud pose a significant threat to our economy, to the stability of our nation’s housing market and to the peace of mind of millions of American homeowners. Operation Malicious Mortgage and our other mortgage-related enforcement actions demonstrate the Justice Department’s commitment and determination to combat these criminal schemes, hold their perpetrators accountable and help restore stability and confidence in our housing and credit markets.” FBI Director Robert S. Mueller, III has stated that these are areas where the FBI will continue to direct resources in the near future.
Operation “Malicious Mortgage” is focused primarily on three types of mortgage fraud:
- Lending fraud, which often involves multiple loan transactions based on misrepresentations about the borrower’s finances;
- Foreclosure rescue fraud, which targets desperate homeowners in an attempt to collect fees for foreclosure prevention services or to obtain ownership interests in their homes; and
- Mortgage-related bankruptcy fraud, which uses the filing of bankruptcy petitions to automatically stay foreclosure in an effort to further lending or foreclosure rescue fraud.
Investigations into these types of practices could involve contact between federal law enforcement and any number of businesses, including financial institutions, real estate agents and brokers, appraisers, and title insurance companies, among others.
McGuireWoods and its Government Investigations group has extensive experience in handling the defense of criminal investigations, including experience in all areas of fraud and other white collar crime. Likewise, the group can leverage numerous tools such as internal investigations in addressing suspicions of fraudulent activity within a corporation. If you would like further information regarding Operation “Malicious Mortgage,” or to discuss any of McGuireWoods’ services, please feel free to contact the authors.