April 1, 2009 / 3:53 PM / 8 years ago

U.S. urges requirement to keep mortgage records

WASHINGTON (Reuters) - The U.S. Justice Department urged Congress on Wednesday to require mortgage companies to retain records for 10 years to make it easier to prosecute fraud.

Rita Glavin, acting head of the department's criminal division, told a hearing of the House of Representatives Judiciary Committee that mortgage settlement statements and other loan documents are critical to investigating or prosecuting fraud.

But they can be hard to get from lenders, brokers and title companies that provide loan services. "All too often, such entities go out of business, and their records are either abandoned or destroyed," Glavin said in testimony submitted to the committee.

She said half of the top 10 U.S. subprime mortgage originators in the second half of 2006 had either gone out of business or been sold a year later.

"Requiring those who provide real-estate settlement services to maintain appropriate records for 10 years following the original date of a loan would significantly assist in the investigation of mortgage fraud," Glavin said.

The committee was considering a number of proposed bills to fight mortgage fraud, including beefing up anti-fraud legislation and increasing spending for financial-fraud investigations.

Glavin said the department supports legislation passed by the Senate Judiciary Committee last month to expand the scope of bank- and financial-fraud legislation to encompass nonbank mortgage lenders. The measure would also apply fraud laws to recent government financial rescue programs.

FBI Deputy Director John Pistole, speaking at the same hearing, said the bureau in December had set up a national mortgage fraud team to oversee and assist corporate and lower-level mortgage probes in local FBI field offices.

Pistole's testimony did not comment on the proposal for new agents, but noted the bureau had been forced by financial constraints to shift resources from other white-collar crime and criminal areas to tackle mortgage fraud.

More than 250 agents were dedicated to mortgage fraud cases as of February, up from 120 in 2007, Pistole said.

President Barack Obama's budget proposal for fiscal 2010 includes money for an unspecified number of new FBI agents to investigate mortgage fraud and white-collar crimes, along with increases for other financial enforcement agencies.

Pistole also said the bureau had deployed computer programs to detect mortgage crimes, such as property "flipping" to artificially inflate value.

Editing by Jackie Frank

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