The Financial Times is reporting the Federal Bureau of Investigation is preparing a nationwide crackdown on mortgage fraud and could arrest hundreds of people across the US this week.
Citing two people familiar with the operation, the FT said the arrests will include people who encouraged borrowers to falsify income on mortgage applications, misleading home owners about foreclosure rescue programmes, and inflating home appraisals.
According to the FT:
Since October 2008, the FBI has opened 23 local mortgage fraud task forces around the country with the purpose of curtailing the illegal misstatement, misrepresentation or omission of material facts on mortgage applications.
Such misstatements and omissions helped to fuel the housing bubble by allowing brokers, banks and other lenders to issue loans to borrowers with unverified income and low credit scores.
Many of these borrowers could not afford the loans and once the housing market started to deflate they stopped making interest and principal payments. More recently, mortgage fraud has involved foreclosure schemes in which financial firms collect a fee for falsely promising to help borrowers stay in their homes.
