The Federal Bureau of Investigation (FBI) has today released its 2006 Financial Crimes Report to the Public. The report has a large section (pages 20 to 28) on mortgage fraud and some of the key parts are reproduced below, along with a link to the report.

Excerpts: “The FBI investigates Mortgage Fraud in two distinct areas: Fraud for Profit and Fraud for Housing. Fraud for Profit is sometimes referred to as “Industry Insider Fraud” and the motive is to revolve equity, falsely inflate the value of the property, or issue loans based on fictitious properties. Based on existing investigations and Mortgage Fraud reporting, 80 percent of all reported fraud losses involve collaboration or collusion by industry insiders.”

“The defrauding of mortgage lenders should not be compared to predatory lending practices which primarily affect borrowers. Predatory lending typically effects senior citizens, lower income and challenged credit borrowers. Predatory lending forces borrowers to pay exorbitant loan origination/settlement fees, sub-prime or higher interest rates and in some cases, unreasonable service fees. These practices often result in the borrower defaulting on his mortgage payment and undergoing foreclosure or forced refinancing.”

“The FBI has also been working to establish broader SAR reporting requirements for mortgage lenders who do have adequate protection under the current safe harbor provisions. The FBI is collaborating with the mortgage industry and Financial Crimes Enforcement Network (FinCEN) to create a more productive reporting requirement for Mortgage Fraud. The FBI has also been working with the FinCEN to promote an efficient and effective method of identifying and reporting fraudulent mortgage activity affecting non-federally insured mortgage institutions.”

“Regional analysis of suspicious activity reports (SARS) indicating Mortgage Fraud violations indicates the West region of the U.S. led the nation with 35.9 percent of Mortgage Fraud-related SARs filed during FY 2006. The Central, Southeast, and Northeast regions had 24.7, 22.6 and 16.9 percent respectively of Mortgage Fraud related SAR filings. However, FBI pending cases indicated that the Central region had the majority of Mortgage Fraud cases with 33.3 percent during 2006. The West, Southeast, and Northeast had 26.7, 27.2 and 12.8 percentages respectively. FBI pending cases by region are consistent with Mortgage Asset Research Institute (MARI) reporting which indicated that five of the top ten Mortgage Fraud affected states in 2006 were located in the Central region.”

“Mapping data from FY 2005 SARs, FBI pending Mortgage Fraud cases, Federal Housing Authority (FHA)-insured loans defaulting between October 1, 2003 and September 30, 2001 and 2005 MARI data, reveals the top 16 states for Mortgage Fraud activity. States documented by three or four sources include California, Colorado, Florida, Georgia, Illinois, Michigan, and Texas. States documented by two sources include North Carolina, Ohio, Utah, and Missouri, and states documented by one source include: Arizona, Indiana, Louisiana, New York, and South Carolina.”

“Through FY 2006, 818 cases investigated by the FBI resulted in 263 indictments and 204 convictions of Mortgage Fraud criminals. The following notable statistical accomplishments are reflective in FY 2006 for Mortgage Fraud: $388.9 million in Restitutions, $1.4 million in Recoveries, and $231 million in Fines.”

Click here to read the full report which contains information about cases of interest, types of fraud and fraud prevention measures.