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DOJ and FBI retract previous mortgage fraud numbers

Analysts expect 25% decline in suspected mortgage fraud in 2012

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The government continues its ongoing battle against mortgage fraud, even as it finds itself retrenching from suspiciously high mortgage fraud numbers reported back in 2012.

Last October, the Department of Justice and the FBI released a report claiming their Distressed Homeowner Initiative found 530 criminal defendants in cases involving more than 73,000 mortgage victims and losses of more than $1 billion in 2012 — startling numbers to anyone.

However, nearly 10 months later, the DOJ and FBI were forced to reconcile those numbers, posting a correction on the DOJ website, with the number of defendants, victims and size of the losses falling well below the agencies' initial numbers.

The corrected report revealed that the number of criminal defendants charged was closer to 107 instead of 530. The number of mortgage fraud victims was more like 17,185 — roughly a quarter the size of the original headcount. And losses came to $95 million, not the $1 billion originally claimed.

A statement released by the DOJ on August 9 said, “An extensive review of the reported cases concluded that the original figures included in the Distressed Homeowner Initiative included not only criminal defendants who had been charged in Fiscal Year 2012, as reported, but also a number of defendants who were the subject of other prosecutive actions – such as a conviction or sentence – in Fiscal Year 2012.”

The statement went on to say some of the defendants charged in mortgage fraud cases were involved in situations where the victims did not actually fit the narrow definition of distressed homeowner that the agencies were following.

The FBI released a memo following the mistake, saying, "This targeted approach resulted in the successful filing of many criminal and civil cases across the country, but regrettably, the statistics reported in October included cases that fell outside the specific parameters of the Initiative."

In an updated press release, the DOJ stated that from Oct. 1, 2011, to Sept. 30, 2012 — FY 2012 — the Distressed Homeowner Initiative focused on fraud targeting homeowners, such as foreclosure rescue schemes that take advantage of homeowners who have fallen behind on their mortgage payments. Normally, the con-artist in these situations ensures the homeowner that he can prevent foreclosure for a significant fee, by having investors buy the mortgage or by transferring the title in the home to persons in league with the scammer.

The end result can mean the homeowner loses everything. Other targets of the Distressed Homeowner Initiative include perpetrators of loan modification schemes who obtained advance fees from homeowners after falsely promising to negotiate more favorable mortgage terms on behalf of the homeowners, the press release stated.

“With home price increases helping homeowners get back above water and billions of dollars in new resources for families still at risk through the recent mortgage servicing settlement, borrowers are finally beginning to see the light at the end of the tunnel. We know, however, that too many families are still facing threats to sharing in that recovery,” said U.S. Department of Housing and Urban Development Secretary Donovan.

Mortgage fraud overall remains a top concern for various government agenies, including the Financial Crimes Enforcement Network, which released a separate report on cases of suspected mortgage fraud.

 

The agency noted a 25% decline in suspected mortgage fraud filings in 2012, with potential claims falling to 69,277 from 92,561 in 2011. 

The data also revealed that 57% of Suspicious Activity Reports received in 2012 involved mortgage activity that began at list five years earlier.

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