Feds plan ‘surge’ in mortgage fraud cases

TAMPA, Fla. – May 8, 2009 – Faced with rampant mortgage fraud that has helped pull the economy into a ditch, federal authorities are in the midst of a “surge” in investigations that they expect will increase prosecutions tenfold in the next year.

“The problem is so large that we could do nothing but mortgage fraud for the next year,” said U.S. Attorney Brian Albritton, whose office is helping coordinate a massive multiagency task force that aims to bring more than 100 cases – many with multiple defendants – by year’s end.

Albritton hopes the spike in prosecutions will help restore public confidence in the marketplace.

The cases won’t involve the stereotypical bad guys brought to court in handcuffs, Albritton and Tampa’s top FBI Agent Steven E. Ibison said.

The investigation will snare people in every walk of life, Albritton said today. “They could be your neighbor.”

“I think greed got the best of a lot of folks,” Ibison said.

“What we’re talking about here is lying,” Albritton said. “This all comes down to lying.”

A typical fraud involves a property flipper. For example, a flipper pays $100,000 for a house and gets a corrupt appraiser to value it higher, say $200,000. Then he pays a straw purchaser to apply for a mortgage at the inflated value. He pays off the house and pockets the difference, leaving the lending institution with the house and an unpaid mortgage.

The straw purchasers come from every strata of society, Ibison said. They are expected to make up the bulk of prosecutions in the first wave.

After that, authorities hope to leverage information from lower-level defendants to go after real estate professionals. Albritton hopes a third wave of prosecutions will take down corrupt lenders.

“Florida and the west coast of Florida are really considered to be ground zero for mortgage fraud,” Albritton said. Nationally, the state ranks second, behind Rhode Island, in the rate of mortgage fraud.

The housing boom concealed a lot of fraud, authorities said.

“At one point, everybody was making money and everything was OK,” Ibison said. “And one day the music stopped.”

“We are straining to get our arms around what is a huge problem in the white-collar area beyond anything we’d normally encounter,” Albritton said.

White-collar crime traditionally takes months or years to investigate, but Albritton wants to compress that to at most 10 months.

“We want to be taking weeks to months to bring people to justice,” Ibison said.

To do that, federal and state agencies are working with real estate professionals and experts in lending institutions. Albritton said he is requiring each of the 105 federal prosecutors in the Middle District of Florida to take on a mortgage fraud case on top of his or her normal workload.

The mortgage fraud problem festered while federal assets were largely diverted from white-collar crime toward terrorism. Ibison said terrorism is still the main priority, but that the agency has learned to be more efficient with its resources.

He said he’s surprised by the magnitude of mortgage fraud.

“The bigger the bubble, the bigger the bang has been,” Ibison said.

Copyright © 2009 Tampa Tribune, Fla., Elaine Silvestrini. Distributed by McClatchy-Tribune Information Services.

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