Thursday, March 26, 2009

Undercover Operation Results in Fraud Charges


Undercover Operation Results in Fraud Charges Against Professionals in the Mortgage Loan Industry

Federal law enforcement officials announced today that 24 defendants, most of whom are professionals in the mortgage loan industry -- including mortgage brokers, loan officers, loan processors, attorneys, accountants, an appraiser, and a banker -- were named in 10 indictments charging them with federal offenses relating to mortgage fraud in the Chicago area.

Nine of the indictments were the product of Operation Madhouse, an undercover investigation conducted by the FBI and the Department of Housing and Urban Development, Office of Inspector General (HUD-OIG), in which undercover law enforcement agents posed as straw buyers of houses seeking assistance in financing and closing fraudulent mortgage transactions. In each of the nine cases, multiple real estate professionals worked to carry out the frauds. Each case involved a different fraudulent mortgage loan arranged by a different group of defendants based in the Chicago area.

Those defendants' roles in the fraudulent transactions, as described in the individual ndictments, included, among other things: preparing loan applications and other documents that they knew to contain false information about the undercover agents' identity, employment, and income; creating (or explaining how the undercover agents could create) fraudulent banking information; fabricating income tax returns; creating fictitious verifications of employment and rental income; creating false appraisals; and submitting the bogus applications and supporting documents to the lenders.

In each of the undercover transactions, a cooperating individual represented that he was selling a house to a nominee buyer who intended to walk away from the property and default on the mortgage after the transaction closed. In reality, the nominee buyers were undercover agents, as were paralegals who assisted in closing the real estate transactions. The houses bought with the fraudulently obtained mortgage loans were actually owned by the federal government. Instead of defaulting on the fraudulently obtained loans after the closings (as the undercover agents had told the defendants they intended to do), the government fully repaid the lenders after each transaction closed.


I'm not sure about your state, but here in Florida it's not necessary for the FBI to conduct a sting to generate this type of criminal behavior.