Home News Stories 2008 January Subprime Loans and More
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Subprime Loans and More

Subprime Loans and More
It’s a Bull Market for Financial Fraud



Imagine landing your dream home.Your credit is a bit shaky, but you manage to get a subprime loan with an adjustable rate mortgage. A few years later the interest rates jump and you can no longer afford to pay. You see an ad for a business that’s willing to help—it’ll pay your mortgage for a modest monthly fee while you get back on your feet. But here’s the heartbreak: it’s a scam. The con artists just take your money and run…

It’s just one of the latest schemes and frauds we’re seeing these days across the financial services industry, our senior criminal investigators said during a briefing Tuesday with the news media in Washington.

These scams—which include plenty of shenanigans with mortgages and subprime loans—are costing the nation tens of billions of dollars a year.

“Greed is definitely not good for our economy right now,” said our top criminal investigative exec Ken Kaiser following the briefing. “It’s hurting homeowners. It’s hurting honest businesses. And it’s hurting investors and markets around the world.”

All good reasons why we’re squarely focused on cracking down on the largest of these financial crimes, launching proactive initiatives and shifting resources as trends emerge, all the while working hand-in-hand with a host of government and private sector partners.

Among the specifics discussed at the briefing:

Subprime mortgage loans:

  • We’re investigating 14 corporations involved in subprime lending as part of our Subprime Mortgage Industry Fraud Initiative launched last year.
  • The companies come from across the financial services industry, from mortgage lenders to investment banks that bundle loans into securities sold to investors. We’re also looking at insider trading by some executives.

Traditional mortgage fraud:

  • We have more than 1,200 cases open today (up about 40 percent from last year), mostly involving fraud for profit, where groups of straw buyers, realtors, etc. rig schemes to buy properties that are flipped or allowed to go into foreclosure.
  • Hotspots include California, Texas, Arizona, Florida, Ohio, Michigan, and Utah.
  • Suspicious activity reports that we review for potential mortgage fraud have grown from 3,000 in fiscal year 2003 to 48,000 in fiscal year 2007. This year, we’re on pace to receive more than 60,000 such reports.
  • A recent case: In November, the owners of a long-time Minnesota homebuilder called Parish Marketing—along with a bank officer, a closing agent, and others—pled guilty to a $100 million mortgage scheme involving some 200 homes.
  • Right now, we’re seeing no links to organized crime syndicates, street gangs, or terrorist groups in our cases.

For more information on financial frauds:
- Financial Crimes Report to the Public, Fiscal Year 2006

- Mortgage Fraud overview