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Mortgage fraud remains prevalent, organized crime involved: FBI

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Mortgage fraud remained prevalent in 2010 despite national efforts to crack down on perpetrators — many of whom have ties to organized crime, according to the FBI. The bureau cited data from CoreLogic (CLGX), which suggests $10 billion in loans originated last year were based on fraudulent application data. The schemes cited by federal authorities run the gamut, with frauds involving loan origination, foreclosure-rescue initiatives and short sales. Fraud also is occurring when parties are engaged in property flipping, loan modifications, equity skimming, builder bailouts, reverse mortgages, and title and escrow deals. The FBI said professionals working in the mortgage industry were involved in many of the cases, with organized crime playing a significant role. "There have been numerous instances in which various organized criminal groups were involved in mortgage fraud activity. Asian, Balkan, Armenian, La Cosa Nostra, Russian and Eurasian organized crime groups have been linked to various mortgage fraud schemes, such as short sale fraud and loan origination schemes," the FBI said. Many of the perpetrators are using past experiences in banking and mortgage-related industries to engage in the schemes. Law enforcement data suggests fraud occurs most often in California, Florida, New York, Illinois, Nevada, Arizona, Michigan, Texas, Georgia, Maryland and New Jersey. FBI analysts blame the down real estate market for creating a confluence of factors that keep mortgage fraud alive. To combat those abuses, the Department of Justice and FBI will continue tackling the issue nationwide as part of a mortgage-fraud initiative launched in 2010. "The current and continuing depressed housing market will likely remain an attractive environment for mortgage fraud perpetrators who will continue to seek new methods to circumvent loopholes and gaps in the mortgage lending market," the FBI concluded in its report. "These methods will likely remain effective in the near term, as the housing market is anticipated to remain stagnant through 2011." Write to: Kerri Panchuk.

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