Special Report: Mortgage Fraud

There is no question that financial fraud is becoming more sophisticated. There's a lot of money in the business of financing real estate transactions. Unfortunately, that means there is no shortage of crooks who would like to steal some of it.

Just consider the case of "REO Flipwagon," outlined on the FBI's financial fraud website. In 2003, the FBI said it initiated an investigation in response to a "massive amount" of mortgage fraud in Jacksonville, Fla. A mortgage broker and a closing attorney were arrested in the case, but not before significant damage was done. Likewise, in "operation clean deed," the FBI infiltrated seven organizations in Charlotte, N.C., that were involved in a multimillion-dollar mortgage fraud ring. The volume of fraudulent loans could have led to $130 million in losses by lenders, the FBI said. Six individuals were charged with bank fraud in the case.

Increasingly, mortgage fraud is not about little fibs on a loan application designed to win approval for a borrower who might not otherwise qualify for the amount of debt or loan type they are seeking. It's looking more and more like organized crime. (The FBI estimates that 80% of mortgage fraud cases involve the participation of an industry insider.) In many cases, multiple parties to the transaction, including loan brokers, appraisers, and closing agents, may be working together to silently hold a stickup. They may not brandish guns or wear masks, but their aims are the same as those of an old-fashioned bank robber. They want the money, and they want it fast.

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