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FBI: Mortgage fraud cases up "exponentially"

NEW YORK (Reuters) - Mortgage fraud cases have increased “exponentially” and federal investigators expect it to be a high priority area in the coming year, a Federal Bureau of Investigation official said on Thursday.

The FBI has roughly tripled the number of agents in New York over the past year working on cases involving conduct such as fraudulent foreclosure rescue schemes and inflated home appraisals.

Supervisory Special Agent Ben Berry told Reuters in an interview at the FBI’s New York office that the agency expects more cases to be brought.

“We are now starting to reap some of the benefits of having ramped up a bit here,” Berry said. “It takes a while sometimes to bring a case to prosecution.”

With home prices falling and the cost of repaying loans rising, hundreds of thousands of people are finding it harder to refinance into cheaper mortgages and hang onto their homes.

“With real losses out there ... the FBI is making this a major focus,” Berry said.

Earlier this week, six people were charged with fraudulently obtaining titles to scores of homes and taking out bad bank loans against them worth more than $20 million as part of a home foreclosure “rescue” scheme.

Homeowners were allegedly told that third party buyers, called “straw buyers,” would hold the titles to the homes for a year, pay off the original mortgages and make payments on the new mortgages while the homeowners cleaned up their credit. Instead, the indictment said, the defendants kept excess cash after paying off the original loans.

The defendants were also accused of submitting loan applications on behalf of the straw buyers, often using documents containing false or misleading information to improve the straw buyer’s credit worthiness.

Berry, whose unit investigated the case along with federal prosecutors, said nationally the FBI has launched 1,200 mortgage fraud investigations this year.

In New York, he said federal prosecutors in Manhattan and Brooklyn had been taking an increased interest in such cases.

Several mortgage fraud cases involved homes in Brooklyn, Queens and Long Island areas, Berry said. “Manhattan prices were already so inflated it is hard to inflate them any more,” he said.

Berry said his team did not handle investigations on the corporate side, such as probes into companies initiated at the behest of the U.S. Securities and Exchange Commission.

Reporting by Paritosh Bansal; editing by Tim Dobbyn

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