High-Profile Arrests Point to Troubling Trend of Costly Schemes
Last week's high-profile mortgage fraud arrests should serve as a chilling wakeup call to banking institutions, experts say. On Wednesday, authorities announced the arrest of Lee Farkas, once at the helm of wholesale mortgage lender Taylor Bean & Whitaker, charging him with a $1.9 billion fraud scheme tied to the government's Troubled Asset Relief Program (TARP) funds.
And then on Thursday, the President's interagency Financial Fraud Enforcement Task Force revealed that since March 1, Operation Stolen Dreams has arrested 485 people for their involvement in mortgage fraud losses exceeding $2.3 billion. The operation also has resulted in 191 civil enforcement actions, which have resulted in the recovery of more than $147 million.
Further, the FBI on Thursday released its 2009 Mortgage Fraud Report, which says reported incidents rose 5 percent (67,190 reports) in fiscal year 2009, when approximately $14 billion in fraudulent loans are estimated to have originated.
According to the FBI's new report, the most common mortgage fraud schemes include loan origination, foreclosure rescue, builder bailout, equity skimming, short sale, illegal property flipping, reverse mortgage fraud and loan modifications.
Emerging trends in mortgage fraud include the defrauding of economic stimulus plans or programs such as TARP, property theft or fraudulent leasing of foreclosed properties and tax-related fraud.
These events and numbers are staggering, but no surprise to industry experts who track mortgage fraud. The need for more due diligence and proactive measures on the part of mortgage lenders is painfully obvious - underscored by the latest trends.
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