Residential mortgage fraud will cost communities nationwide an estimated $653 million in 2005, with commercial mortgage fraud costing an estimated $812 million, an FBI agent said at a Colorado mortgage fraud summit Wednesday, the Pueblo Chieftain reported.
FBI agent Dan Bradley of Colorado Springs, whose coverage area includes Southern Colorado, addressed more than 500 people Wednesday at a statewide seminar on mortgage fraud in Pueblo, according to the Pueblo Chieftain.
Regulating the mortgage industry is a good first step toward curbing mortgage fraud but doesn’t solve the problem, the agent said, according to the Chieftain.
There are generally two types of fraud cases, Bradley said, with the first involving borrowers who intend to live in their houses. These types of fraud represent about 20 percent of cases and are generally low on the FBI’s list of priorities, though he said the FBI is still interested in them, the Chieftain reported.
The second group of mortgage fraud cases involves industry professionals, and in some cases, the borrowers are completely unaware of the scheme, media accounts said. Agent Bradley called the schemes “for profit” schemes, where the goal is to make money, not necessarily to provide housing for the borrower, according to reports.
Examples of these schemes range from property flipping – where homes are bought and sold multiple times, artificially inflating the price – to more complicated schemes such as equity skimming, reports said.
In cases of equity skimming, lenders convince victims to quit claim their homes to them by offering to help pay off the mortgages. The suspect then rents the home back to the victims or others but never pays the mortgage claim.
“I am who I am today because of equity skimming,” Bradley said, adding that he met his wife on an equity skimming case in Arizona, reports said. “They (the scam artists) received 30 years and I got a life sentence,” he joked, according to reports.
The common denominator in all of these cases is that they’re provable, Bradley said. But the problem is that they take time, he said. “I like to say that Justice is blind, but she’s slow as hell,” Bradley said. “It takes 24 months to investigate most of these cases and the majority of the cases that were open three years ago are still open today,” the agent said, according to reports.
Creating an effective partnership with other entities and the private industry is one way to help speed the process, he said. Another is to regulate the mortgage industry, he said. Colorado is one of just two states where the mortgage industry isn’t regulated. Alaska is the other.
Last month, the Colorado Association of Mortgage Brokers proposed such regulation. Bradley said the regulation won’t stop the crimes, but it could lessen the damage and get unscrupulous brokers off the streets sooner, reports said.
“Because there is no regulation of the industry, the only hammer we have is criminal prosecution,” Bradley said, according to the Chieftain.
With regulation, licenses can be suspended or revoked before the FBI has finished its investigation, which would help keep the damage that they do to a minimum, the agent said, according to reports.
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