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More Than 400 Held in FBI Mortgage Sweep

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More Than 400 Held in FBI Mortgage Sweep

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More Than 400 Held in FBI Mortgage Sweep

More Than 400 Held in FBI Mortgage Sweep

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The FBI says it has arrested more than 400 people in the last three months on charges related to mortgage fraud. Agents have arrested real estate agents and others. On Thursday, the FBI arrested two Bear Stearns investment fund managers. NPR's Dina Temple-Raston and Michelle Norris discuss the arrests.

MICHELE NORRIS, host:

The Justice Department has just concluded the latest phase in an enormous crackdown on mortgage fraud. The sweep was named Operation Malicious Mortgage. The FBI arrested more than 400 real estate agents, brokers, appraisers and developers in the past three months alone. The message is clear: the penalty phase of this mortgage crisis has officially begun.

NPR's FBI correspondent Dina Temple-Raston has been reporting the story. She joins me now.

Dina, now we saw this week the Bear Sterns' hedge fund managers arrested in New York and then the announcement of this wider sweep. What kind of people are the FBI targeting?

DINA TEMPLE-RASTON: Well, this broader operation has people from just about every aspect of the real estate transaction in the crosshairs. They run the gamut from straw buyers who are people who put themselves on a mortgage application saying they intend to live in a house but never do, to run-of-the-mill real estate people; real estate agents, mortgage brokers, appraisers, developers. And the FBI basically said the rings had - they busted over the last three months encompassed essentially every part of the real estate food chain. And they estimate that the losses to homeowners and other borrowers who are victims of this at more than $1 billion.

NORRIS: So every part of the real estate food chain. What were these people accused - or what are they accused of doing? What kind of scams are they accused of running?

TEMPLE-RASTON: Well, the FBI officials I spoke to said mortgage fraud was just like any other kind of bank fraud, except it has something to do with the real estate market. Recently, for example, officials have been arresting people for home equity lines of credit scams. Now you've heard about people stealing your identity to open up credit cards. Instead of a credit card, scammers have been zeroing in on people who they think have a lot of equity in their homes. And they steal their identities and then go online and get a home equity line of credit on that person's house. And then they take the money. And the FBI says the possibilities seem to be endless.

NORRIS: So even with the downturn in the market, it sounds like there are still opportunities for scam artists and fraud?

TEMPLE-RASTON: Indeed, the FBI said that in a down market, there are as many opportunities for scam artists as there are in an up market. Now, quite a few of these arrests the past couple of months have been related to something called a foreclosure rescue scam. Like people who are essentially - can't make their mortgage payments. Someone I met in Brooklyn not long ago, her story was typical. She was injured, got behind on her mortgage payment and was looking for help. And she saw an ad in the paper from someone who said he was a foreclosure consultant. He said he could help her get a mortgage at a lower rate. And she was under the impression that she was refinancing her home.

She ended up, in fact, signing a massive number of papers, one of which she didn't know at that time, was the title of her house. So instead of refinancing her home, she ended up selling it. It's these kinds of scams where lots of are people are involved. You have mortgage - bogus mortgage brokers, you have appraisers who are on the take, you even have lawyers who are in on the scam. And those are the people that the FBI was trying to nab over the last couple of months.

NORRIS: And just quickly, Dina, before we let you go, is this a national campaign?

TEMPLE-RASTON: It is a national campaign. The FBI said over 80 percent of their offices were involved in this particular operation. And just in a short amount of time, they charged 406 defendants - a little less than half of them have already been convicted - and more than 80 of them are already serving sentences. So this is a really big sweep.

NORRIS: This is NPR's FBI correspondent, Dina Temple-Raston. Dina, thanks so much.

TEMPLE-RASTON: You're welcome.

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FBI Sweep Reveals New Twists to Mortgage Fraud

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The Justice Department appears to have officially opened the penalty phase of the mortgage debacle in this country.

On Thursday, the FBI paraded two indicted Wall Street executives before TV cameras. That same day, the bureau announced the arrests of hundreds of people who allegedly perpetrated mortgage scams nationwide.

The arrests came as part of the FBI's sweeping Operation Malicious Mortgage. In this phase alone, FBI officials said they arrested more than 400 real estate agents, brokers, appraisers and developers. People from just about every aspect of a real estate transaction ended up in the FBI's cross hairs.

The 406 people arrested between March 1 and June 18 included everyone from alleged straw buyers — who allow scammers to use their names and credit histories on mortgage applications — to run-of-the-mill real estate agents, mortgage brokers, appraisers and developers.

While the word "mortgage" appears in some form on all these sketchy transactions, FBI officials said that mortgage fraud was just like any kind of bank fraud: People are after money and have thought of ingenious ways to get it.

Recently, for example, officials have started arresting people for scams tied to home equity lines of credit. It is identity theft with a real estate twist.

Instead of stealing an identity to secure a credit card, scammers have been zeroing in on people they think have a lot of equity in their homes. They steal their identities, then go online and get a home equity line of credit on that person's house and take the money. The FBI said the possibilities seem to be endless, and even in a down market, there are many opportunities for scam artists.

Many of the recent arrests have been related to something called a Foreclosure Rescue Scam. The schemers prey upon people who are about be foreclosed on. They promise the homeowners that they can live in their houses mortgage-free, and then buy their houses back after a year if they just sign a few papers. What their victims don't know is that the scammers work with straw buyers to take out a bigger mortgage that essentially cashes out any equity in the house. In many instances, the homeowners end up losing their homes anyway.

These kinds of scams involve plenty of players: from bogus mortgage brokers to appraisers who are on the take. Even lawyers may be in on the scam, encouraging people to sign the papers, misrepresenting what the papers actually say. Those are the types of people arrested under Operation Malicious Mortgage.

The operation was a massive one. The FBI said more than 80 percent of their offices were involved. In all, more than 406 defendants were charged. A little less than half of those have been convicted so far, and more than 80 of them are already serving sentences.

The FBI conducted a similar operation — Quick Flip — two years ago. Many of the people arrested under that operation were appraisers on the take: They were inflating their assessments of property values, so that phony buyers could make a fast buck by flipping houses in a then-hot market.

It is no coincidence that the arrest and indictment of two Wall Street executives — hedge fund managers Ralph Cioffi and Matthew Tannin — came on the same day that the FBI announced the results of Operation Malicious Mortgage.

The FBI is sending a specific message: If you are involved with mortgage fraud — whether on Wall Street with high-level investors, or on Main Street with ordinary homeowners — the bureau intends to catch and prosecute you.

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