Metro Detroit has been devastated by the crime, say police, FBI
BY JOHN GALLAGHER • FREE PRESS BUSINESS WRITER • October 8, 2008
Law enforcement agencies Tuesday launched an all-out war against mortgage fraud in metro Detroit, acknowledging that the crime has devastated southeast Michigan.
Acting U.S. Attorney Terrence Berg announced the formation of a task force involving federal, state and local agencies. The group will take on the financial crimes that often leave neighborhoods pockmarked by abandoned and foreclosed homes.
"We are all victims," Andrew Arena, FBI special agent in charge at the Detroit office, said Tuesday. "I think it's an understatement to say that mortgage fraud has had a profound impact on the economy of the state of Michigan."
Mortgage fraud began to flourish a few years ago in the easy-money, anything-goes mortgage market that flooded the nation with bad loans. Bad housing loans bundled into exotic securities are at the root of the economic crash that has brought down Wall Street financial houses, prompted Congress to approve a $700-billion bailout and rippled to economies worldwide.
In that inflated credit atmosphere, many varieties of mortgage fraud arose.
Some, akin to identity theft, saw criminals file a false deed to an owner's home and then sell the house. In other types, phony buyers and sellers colluded to establish an inflated sale price for a house, get a big mortgage based on that, and then walk away with the cash.
Bernard Youngblood, Wayne County's register of deeds, estimated Tuesday that perhaps 25% of the home foreclosures in metro Detroit involve mortgage fraud.
"It's huge," Youngblood said of the problem. "It's a lot easier than putting a knit hat over your head and going in and holding up a 7-Eleven."
The agencies involved in the task force include the Internal Revenue Service, the Federal Deposit Insurance Corp., the Michigan Attorney General's Office, several agencies of Wayne, Oakland and Washtenaw counties, and three major lenders -- Flagstar Bank, JP Morgan Chase Bank and Bank of America.
Concern about mortgage fraud in southeast Michigan goes back at least to 2005, when three Wayne County agencies set up their own task force. Those task force agencies -- the Register of Deeds, the Sheriff's Office and the Wayne County Prosecutor's Office -- will be in the new multiagency force.
The local task force opened nearly 700 case files on complaints, got almost 40 convictions of people who were involved in fraud, and returned about 150 homes to their rightful owners after the properties were stolen through fraud.
The new task force will enable local, state and federal agencies to coordinate their actions, share information and proceed along a common front against the criminals.
Berg said people who engage in mortgage fraud range from petty thieves, drug dealers and members of biker gangs to insiders at financial institutions who gave in to temptation in the period of easy money.
"With metro Detroit being at the top of nearly every list in terms of mortgage fraud and home foreclosures, we need a full-court press that brings all the federal, state, and local law enforcement agencies, the regulators and the major banks together to go after the big mortgage fraud players," Berg said.
But stopping mortgage fraud is not easy, Youngblood said.
"These things are extremely sophisticated, and it takes a sophisticated group of law enforcement officials to get involved with them," he said. "These are jigsaw puzzles that have to be put together."
BY JOHN GALLAGHER • FREE PRESS BUSINESS WRITER • October 8, 2008
Law enforcement agencies Tuesday launched an all-out war against mortgage fraud in metro Detroit, acknowledging that the crime has devastated southeast Michigan.
Acting U.S. Attorney Terrence Berg announced the formation of a task force involving federal, state and local agencies. The group will take on the financial crimes that often leave neighborhoods pockmarked by abandoned and foreclosed homes.
"We are all victims," Andrew Arena, FBI special agent in charge at the Detroit office, said Tuesday. "I think it's an understatement to say that mortgage fraud has had a profound impact on the economy of the state of Michigan."
Mortgage fraud began to flourish a few years ago in the easy-money, anything-goes mortgage market that flooded the nation with bad loans. Bad housing loans bundled into exotic securities are at the root of the economic crash that has brought down Wall Street financial houses, prompted Congress to approve a $700-billion bailout and rippled to economies worldwide.
In that inflated credit atmosphere, many varieties of mortgage fraud arose.
Some, akin to identity theft, saw criminals file a false deed to an owner's home and then sell the house. In other types, phony buyers and sellers colluded to establish an inflated sale price for a house, get a big mortgage based on that, and then walk away with the cash.
Bernard Youngblood, Wayne County's register of deeds, estimated Tuesday that perhaps 25% of the home foreclosures in metro Detroit involve mortgage fraud.
"It's huge," Youngblood said of the problem. "It's a lot easier than putting a knit hat over your head and going in and holding up a 7-Eleven."
The agencies involved in the task force include the Internal Revenue Service, the Federal Deposit Insurance Corp., the Michigan Attorney General's Office, several agencies of Wayne, Oakland and Washtenaw counties, and three major lenders -- Flagstar Bank, JP Morgan Chase Bank and Bank of America.
Concern about mortgage fraud in southeast Michigan goes back at least to 2005, when three Wayne County agencies set up their own task force. Those task force agencies -- the Register of Deeds, the Sheriff's Office and the Wayne County Prosecutor's Office -- will be in the new multiagency force.
The local task force opened nearly 700 case files on complaints, got almost 40 convictions of people who were involved in fraud, and returned about 150 homes to their rightful owners after the properties were stolen through fraud.
The new task force will enable local, state and federal agencies to coordinate their actions, share information and proceed along a common front against the criminals.
Berg said people who engage in mortgage fraud range from petty thieves, drug dealers and members of biker gangs to insiders at financial institutions who gave in to temptation in the period of easy money.
"With metro Detroit being at the top of nearly every list in terms of mortgage fraud and home foreclosures, we need a full-court press that brings all the federal, state, and local law enforcement agencies, the regulators and the major banks together to go after the big mortgage fraud players," Berg said.
But stopping mortgage fraud is not easy, Youngblood said.
"These things are extremely sophisticated, and it takes a sophisticated group of law enforcement officials to get involved with them," he said. "These are jigsaw puzzles that have to be put together."
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