In a CNN report it was announced that the FBI has opened criminal investigations of 14 companies related to sub-prime mortgage loans. The following is quoted from the CNN report:
Neil Power, chief of the FBI economic crimes unit, attributed the increase “to good old-fashioned greed.”
“On insider trading, we’re looking in some cases at whether executives were aware that the value of their holdings would be going down and the executives traded on that information,” said Power.
“On accounting fraud, we’re looking at housing developers who may have reported cash reserve accounts to reflect falsely inflated values.”
Over the past several months, I have been reporting multiple instances of mortgage fraud – convictions and sentences that followed. With the flow of free (or at least it seemed that way) money – it was inevitable the “greed” as Neil Power put it, would kick in. And, kick-in it did.
According to senior officials the number of suspicious activity reports jumped from 35,000 in 2006 to 48,000 in 2007 and for 2008 is on track to exceed 60,000. According to FBI reports (per CNN) 56% of the cases had losses of more than $1 million.
Officials identified the states that are the “top 10 mortgage fraud hot spots” as California, New York, Texas, Florida, Georgia, Utah, Illinois, Indiana, Ohio and Michigan.
Surprise NO! Considering that just this past week a Pennsylvania mortgage broker was sentenced to 3 years for a fraud scheme and a Texas Broker/Real Estate Developer plead guilty to bank fraud for his real estate activities, it is going to be a long time before the issues related to mortgage fraud completely surface.
I would not be surprised if there are multiple restrictions and controls put in place so that this type of greed and the consequences that follow can be avoided in the future.
As a business ethics and white collar crime speaker (www.chuckgallagher.com) , I address groups routinely about the Truth About Consequences. Every choice has a consequence and, today, we are just exposing the tip of the iceberg when it comes to mortgage fraud.