FBI Arrests Hundreds In Mortgage Fraud Case

Losses Total About $1 Billion

POSTED: 7:10 am PDT June 19, 2008

The FBI said Thursday that it has arrested more than 400 real estate brokers since March -- including dozens over the last two days -- in its crackdown on incidents of mortgage fraud that have contributed to the country's housing crisis.

One law enforcement official put the losses to homeowners and other borrowers who were victims in the schemes at more than $1 billion. The Justice Department and FBI announced the recent arrests at a news conference Thursday afternoon in Washington. Apprehensions were made in Chicago, Atlanta, Miami and suburban Maryland.

"Operation Malicious Mortgage" resulted in 144 mortgage fraud cases in which 406 defendants were charged. On Wednesday, 60 arrests were made in mortgage fraud-related cases in 15 districts. Charges were brought in every region of the United States and in more than 50 judicial districts by U.S. Attorneys’ offices based upon the law enforcement and investigative efforts of participating law enforcement agencies.

"Mortgage fraud and related securities fraud pose a significant threat to our economy, to the stability of our nation's housing market and to the peace of mind of millions of American homeowners," said Deputy Attorney General Mark R. Filip. "'Operation Malicious Mortgage' and our other mortgage-related enforcement actions demonstrate the Justice Department’s commitment and determination to combat these criminal schemes, hold their perpetrators accountable and help restore stability and confidence in our housing and credit markets."

FBI Director Robert Mueller said that the FBI will continue to direct resources to prosecuting mortgage fraud.

"This operation is an example of our unified commitment to address this significant crime problem," Mueller said. "The FBI will continue to direct investigative and analytic resources towards mortgage fraud and corporate securities fraud that threaten our nation's economy."

Also a part of the operation was the indictment of two former Bear Stearns managers in New York, becoming the first executives to face criminal charges related to the collapse of the subprime mortgage market.

Ralph Cioffi and Matthew Tannin, who have been the target of a probe by Brooklyn federal prosecutors, are suspected of misleading investors about the risky market.

Houston Arrests

A group of Houstonians are accused of defrauding banks and stealing $24 million in a fraudulent mortgage scam, KPRC-TV in Houston reported. Six defendants are suspected of recruiting people with good credit to act as buyers in fraudulent mortgage deals, prosecutors said.

Federal agents began making arrests early Wednesday morning, delivering defendants to the federal courthouse who are alleged to have operated the massive mortgage fraud ring. Officials said they were identified as mortgage loan officers or straw buyers who defrauded lenders of $24 million. The defendants were charged with conspiracy, fraud and money laundering. Named in the indictment were Latasha Bellow, Frankthea Williams, Ishmael Laryea, Charles Joseph Deshawn Wilson, Kristen Way and Robert Stanley.

The indictment alleges phony buyers were recruited to apply for loans to buy pricey condominiums in Houston and surrounding suburbs. The loan applications allegedly used fraudulent information to obtain millions of dollars that the defendants then pocketed, the indictment said.

Attorney Ed O'Suji represents Williams. "She's not guilty. She's been in real estate for the last five to six years. This is something she makes a living off of like any other real estate agent or broker," O'Suji said. Williams and two other defendants made federal court appearances Wednesday. Their bond was set at $50,000.

The remaining three were scheduled to appear in court on Thursday.

[All we can say is: It is about time! This mortgage fraud business was widespread and has significantly contributed to the housing crisis in general, and problems in our own little corner of the Universe in Santa Clarita. If some really high profile action were taken locally against some of these crooks, the real estate and mortgage business would improve their practices immediately!]

We were sent this article from NBC News by our favorite inspector team, John and Linda St George. Thanks!