DoJ Cracks Down on Mortgage Scams

Last week, the Justice Department arrested more than 500 people who were involved in mortgage scams. The action was described as a “nationwide takedown” of those who were perpetrating mortgage scams which were mainly aimed at the homeowners who were already having financial difficulties in paying their monthly payments.

The authorities – both state and federal – have been able to recover more than $200 million for victims of these mortgage scams through civil and criminal court cases. However, that is merely a drop in the bucket compared to the $2.3 billion that has been lost through hundreds of cases and homebuyers who have fallen victim to these fraudulent practices. Attorney General Eric Holder has stated that the scope of the fraud is “truly astonishing.”

One former mortgage broker – Michael Fiorito – has been sentenced to more than 20 years in prison because he played a major role in a mortgage scam that resulted in homeowners losing more than $400,000. They thought they were refinancing their homes through his company, but they were instead tricked into selling their homes. According to the Justice Department, Fiorito told the homeowners that they would receive a home equity check. Instead, Fiorito either intimidated them into signing the checks over to him or he would get the checks before the homeowners even saw them.

According to reports, the reports of suspicious activity relating to mortgages has gone up by about 5 percent for the 2009 fiscal year. As a result, the FBI has been putting more efforts into solving the problem. The number of investigations into mortgage fraud by the FBI has gone from 1,200 for the 2007 fiscal year to over 3,000 this past year. The Obama administration has even jumped into the fray with the Financial Fraud Enforcement Task Force in an effort to coordinate the local, state and federal efforts for prosecuting those involved in financial scams and misconduct.

Investigators have gone undercover to help flush out the mortgage scammers. In one instance, a tax preparer from New York was working as an informant for the FBI for 11 months. He would produce fake documents like tax returns and check stubs and then sell them to various mortgage brokers, realtors and lenders. In another case in Miami, two people were caught advertising fraudulent mortgage services to Haitian-Americans which resulted in $4.4 million in losses.

If you are in financial distress, don’t just jump at the first person or company that wants to help you with your mortgage difficulties. If you are unsure if you are being led astray, find out more by visiting www.stopfraud.gov. And if you think you are being defrauded, contact your local authorities right away to begin legal action and minimize your losses.