U.S. Attorney and FBI Announce Creation of Connecticut Mortgage Fraud Task Force

FROM FBI PRESS RELEASE:

Nora R. Dannehy, United States Attorney for the District of Connecticut, and Kimberly K. Mertz, Special Agent in Charge of the New Haven Division of the Federal Bureau of Investigation, today announced the formation of the Connecticut Mortgage Fraud Task Force, which will investigate and prosecute mortgage fraud cases and related financial crimes occurring in Connecticut.

During the past year, the U.S. Attorney’s Office in Connecticut has brought charges or secured convictions in several major mortgage fraud cases.  These cases have been successfully investigated through a collaborative effort of multiple federal and state law enforcement agencies.  The Connecticut Mortgage Fraud Task Force will greatly assist the concerted efforts in investigating and prosecuting mortgage fraud and related financial crimes.

The Connecticut Mortgage Task Force includes representatives from the U.S. Attorney’s Office; Federal Bureau of Investigation; Internal Revenue Service – Criminal Investigation Division; U.S. Postal Inspection Service; U.S. Department of Housing and Urban Development, Office of Inspector General; Federal Deposit Insurance Corporation, Office of Inspector General, and State of Connecticut Department of Banking.

“The investigation and prosecution of mortgage fraud is a key component of the U.S. Attorney’s Office’s efforts to combat economic crime in Connecticut,” stated U.S. Attorney Nora R. Dannehy.  “The formation of this Task Force will go a long way toward making sure that those who have profited while inflicting damage to our neighborhoods and our economy will be brought to justice.”

Most mortgage fraud cases involve false representations on mortgage loan applications, including the falsification of income, liabilities or employment, and fraudulently inflated property appraisals.  The investigators on the Connecticut Mortgage Fraud Task Force will be investigating cases involving a variety of mortgage fraud schemes, many of which involve  multiple suspects, multiple borrowers, and millions of dollars in fraudulent loans.

“Mortgage fraud hurts everybody, and we need the public’s help to bring mortgage fraudsters to justice, as they have reaped a large amount of money and helped to create our state’s and our nation’s current housing and credit problems,” stated FBI Special Agent in Charge Mertz.
In addition to investigating past mortgage fraud schemes that have contributed to the nation’s current economic crisis, the Task Force also will focus on emerging crime trends that are associated with the growing tide of foreclosures, including “foreclosure rescue” schemes, and “short sale” schemes.

Foreclosure rescue schemes are coordinated by unscrupulous “foreclosure specialists,” who are individuals that prey on desperate homeowners by persuading them to sign over the deeds to their homes to a “specialist.”  The “specialist” promises the homeowners that they can stay in their homes, make “rent” payments, and eventually repurchase their homes.  Instead of passing along the “rent” payments to a mortgage company, however, the “specialist” illegally retains the payments along with extra fees.  The homes continue into foreclosure, and the homeowners suffer additional losses.  In some situations, the “specialist” steals the equity in the home by refinancing it without the homeowner’s knowledge.  The specialist then fails to pay the new mortgage and the home ends up in foreclosure.

In a short sale scheme, a buyer purchases a home with no intention of making payments.  Often, additional funds are included in the purchase loan for planned improvements.  However, the improvements are never made and the buyer keeps the money.  After a few months, the buyer informs the lender that the house will foreclose.  The buyer then presents to the lender a possible pre-foreclosure buyer who, unknown to the lender, is a part of the fraud scheme.  The second buyer offers to purchase the home at a price below the current loan amount, and the lender agrees.  In some instances, the fraudulent buyers damage the house to further justify the lower offer.  After the deal closes, the buyers repair the damage, have the home appraised at a higher price, and sell it for a profit.

Citizens are encouraged to report any suspected mortgage fraud activity by calling 203-333-3512 and requesting the Connecticut Mortgage Fraud Task Force, or by sending an email to ctmortgagefraud@ic.fbi.gov.

In addition, U.S. Attorney Dannehy and FBI Special Agent in Charge Mertz urged distressed homeowners to do business only with companies that are known to be trustworthy.  Homeowners should never transfer title to a property, or disclose any personal information, unless they are certain that they are dealing with a reputable business.