As part of an undercover investigation called “Operation Madhouse” conducted by the Federal Bureau of Investigation, the Department of Housing and Urban Development's Office of Inspector General and the Internal Revenue Service Criminal Investigation Division, 13 individuals have been arrested in Chicago for participating in a mortgage fraud scheme carrying out three separate transactions involving four homes on the city's south side.
During the investigation, federal agents posed as straw buyers of houses and were seeking assistance in financing and closing fraudulent mortgage transactions.
According to the complaint affidavits in each of the three cases, a cooperating individual who was working with the federal government claimed to know someone at a bank who would approve fraudulent loan applications on behalf of the straw buyers provided by the undercover investigation.
The defendants supposedly knew that the purchaser (straw buyer) had no intention of occupying the property and that the loan application contained multiple false statements.
Each defendant allegedly played a role in the fraudulent transactions by preparing loan applications and other documents that they knew contained false information about the undercover agents' identity, employment and income as well as creating false appraisals for the properties being purchased.
“Mortgage fraud continues to occur despite widespread publicity about the real and serious financial consequences that result,” said Patrick Fitzgerald, U.S. attorney for the Northern District of Illinois. “Undercover operations like this help provide an effective deterrent because corrupt mortgage industry professionals and others will have to wonder whether the person sitting across the closing table from this is actually an undercover agent.”
Two of the defendants were charged with one count of bank fraud in two separate cases. The remaining 12 defendants were each charged with one count of bank fraud in one of the three different transactions.
Bank fraud carries a maximum penalty of 30 years in prison and a $1 million fine.
The Department of Justice said a bank and title company assisted in this investigation.
