FBI Expands Probe of Mortgage Fraud — Now Involving 19 Mortgage Companies and 1,300 Cases. Reverse Mortgages Also Under Scrutiny.

The FBI is expanding its wide-ranging probe of the mortgage industry.

At a Senate hearing on Wednesday, FBI Director Robert Mueller said his agency is currently investigating an estimated 1,300 home mortgage fraud cases, and that the FBI’s probe into potential mortgage fraud now includes investigations into 19 separate mortgage companies.

The FBI, he said, has already “identified 19 corporate fraud matters related to the sub-prime lending crisis … targeting accounting fraud, insider trading, and deceptive sales practices.” 

Mueller also said that the FBI expected to expand its investigation even further. 

There was, he said, “no end in sight” to the growing number of fraud cases. 

“We’ve had a tremendous surge in cases related to the sub-prime mortgage debacle,” Mueller told a Senate Appropriations panel. “We expect them to grow even further.”

“I’m not sure at this point we can see the extent of the surge,” he added.

Mueller declined to go into the specifics of the investigation, but in previous announcements the FBI said it was looking into possible accounting fraud, insider trading or other violations in connection with loans made to borrowers with weak, or subprime, credit.

Mueller said he believes part of the problem is “rampant conflicts of interest in the corporate suites.” He said that FBI investigations “further emphasize the need for independent board members, auditors, and outside counsel. Shareholders rely on the board of directors to serve as the corporate watchdog. … [But] board members are often beholden to the executives they are expected to oversee.”

With one exception, the agency declined to identify the companies under investigation but has said that the inquiry, which began last spring, involves companies across the financial industry, including mortgage lenders, loan brokers and Wall Street banks that packaged home loans into securities.

The FBI has also said that the “hotspots” for its mortgage fraud investigations include California, Texas, Arizona, Florida, Ohio, Michigan, and Utah.

The one company that Mueller did acknowlege as being involved in the probe, Doral Financial Corp., had its former treasurer indicted last month for investment fraud. 

The FBI has also acknowledged in the past that the largest U.S. mortgage lender, Countrywide, is under investigation for misrepresenting its financial position and the quality of its mortgage loans.

It is also known that several major investment banks, including Goldman Sachs, Morgan Stanley, and Bear Stearns, have been asked to provide information to the government, and Beazer Homes has said that it had received a federal grand jury subpoena related to its mortgage business.

In addition to announcing an expansion of the number of cases and companies being investigated, Mueller also indicated a new direction for the FBI’s inquiry: reverse mortgages. 

Reverse mortgages release the equity in a property to the homeowner in one lump sum or multiple payments. The homeowner’s obligation to repay the loan is deferred until the owner dies, the home is sold, or the owner leaves the home.  In the U.S., reverse mortgages are available for people 62 years old or older.

Reverse mortgages are typically used to finance retirement or pay unexpected medical bills.  While reverse mortgages can make sense for seniors, the FBI is concerned about possible abusive sales practices that prey on seniors, such as aggressive and untruthful marketing and excessive fees.

Mueller said that the increasing number of mortgage cases has forced the FBI to shift agents from other areas, such as health care fraud and other financial crimes, to focus on mortgage lending practices.

The FBI has also previously indicated that it is cooperating with the Securities and Exchange Commission, which is conducting more than three dozen civil investigations into how subprime loans were made and packaged, and how securities backed by them were valued. 


For the latest news of the FBI’s expanding probe of the mortgage industry, click here.


6 responses to “FBI Expands Probe of Mortgage Fraud — Now Involving 19 Mortgage Companies and 1,300 Cases. Reverse Mortgages Also Under Scrutiny.

  1. Upon the decision to relocate from CA to Toledo, OH, my husband & I reviewed homes in Toledo, met a realtor on the internet from Sulfur Springs Realty who told us she could show us property once we arrived in Toledo, OH. Upon our long drive to Toledo we met the agent, who told us she knew a broker who could help us fund the loan for the house we had chosen. My husband & I met with Homelend Mortgage Brokers, Inc. in Holland,Ohio and signed an agreement. The loan officer questioned me and my husband’s abilitiy to pay 5% down pmt on the $147,000 asking price for the property we had chosen to purchase. We told the agent we had recently sold a property in Florida, and the agent requested a copy of our proceeds. My husband & I drove back to CA and during the escrow period, I was contacted by the agent, who told me that he had found a lender, although, instead of 5% down pmt., the loan could not be funded unless I paid a 20% down payment due to my low credit score and that a second loan would be required. My husband is a Veteran, and wanted to use his VA preference to purchase the property, but we were denied and told that Homelend did not process VA loans. We agreed to pay the 20% more, as we could not get back to Ohio. Upon close of escrow, I had to pay $36,173.01 to close escrow. This included pmt. for hazard and flood insurance. It was my understanding that because of the large down pmt I made, that the loan would be at a fixed rate. I was never told the reason why we had to have a second loan. Because of the misrepresentation at the onset of this loan by Homelend Mortgage Brokers, Inc, and Fremont Investment and Loan, I believe that my husband and I are victims of predatory lenders. We have had to file bankruptcy, and are now in foreclosure. We worked hard to own our home and don’t believe we should have to loose our house because of this type of bad business practice by mortgage brokers, lenders and banks. I have made complaints to the Attorney General, Office of the Comptroller, Department of Commerce, but without results, as investigations are time-comsuming. BUT, if someone were to investigate my loan carefully, it is only obvious there is a scam. $147,000 dollar loan at 8.9% interest, with a down pmt of $36,173,01 with a “piggy-back” loan, of &7350 at 13% interest and this is an ARMS at 2/28. I could understand if we had little down pmt, but we had almost 50 thousand dollars from proceeds of a house we had just sold??
    I know that there is a God! And this company really truely needs to be investigated.
    Homelend Mortgage brokers, Inc, and Fremont Investment. My loan was sold to Wells Fargo Bank 6 mos. later in 2005, and America’s Servicing Company, owned by Wells Fargo Bank began to force place an escrow account for unneccessary hazard and flood insurance that I had already purchased! ASC has chosen to pay my property taxes [and they charge by two years], thereby ballooning the escrow account to extreme amounts that rocket my monthly mortgage payments by increased interest! This is one loan that if investigated, will propably reveal a lot of how these subprime mortgages can get away with their fraud!
    Mrs. Guice-Randolph

  2. Everything should be under scrutiny, but reverse mortgages seem fine to me.

  3. ASC is a company without communication skills via inept clerks that can cause you to fall 2 months behind in payments just for calling to get a littile help on a $3000 arrears scenario.They upped my payments $500 cancelled December and made it for January 7 then they send a bill for the 16th of Jan.I bank wire payments about $135 more than needed and they put it into a suspense account.Then send you back the money.They subsequenty take out the fees when convenient out of future payments.
    They also say I can’t pay down arrears with affordable extra money and don’t send in writing the agreement they gave you,20 days later I receive the bill with different due dates and no mention of foreclosure.
    They are not forthcoming and are a menace to the word communication and to consumers who with a little help can get in sync.NJ banking commissioner investigators say they should apply the extra money to the arrears.
    They are a joke and need to be investigated in a state by state and as the AG’s sued MicrSoft for the people thety should take the bull by the horns and teach a lesson.
    Can you imagine a company not letting you pay them back and in a way that could get you solid again.
    In octber I was only $1900 in the areears.Novembers $1600 was wired via Wachovia directly to the WF account of ASCv and noted to direct it to my account.The money was there asap on the 17th but didn’t post it or show on the next bill which I refer to above.

  4. Andrea Guice , I just saw your story on CNN and I have to say that they butchered the facts. Your situation is far worse than they reported. I have been in the mortgage industry for 20 years and the way CNN presented the numbers made no sense. In fact, the numbers they presented would make it impossible for your payment to jump like that. I have to guess here but it sounds like your “down payment” did not go towards the purchase price of the house but instead went to FEES. You stated that you have a $147K 1st mortgage and a $7k second yet the house was purchased for $147K??? Something is wrong and I would love to see the loan docs, especially the good faith estimate. Unfortunately Freemont Lending is out of biz and its a good thing as they were know for this type of crap.

    Keep fighting and make sure those who you talk to understand the whole story. All your “down payment” we to fees like Origination Fee, Document Fee, Fax Fees, Broker Fee….

    Basically you take the purchase price of your home ($147k) and add all the fees to it. That comes to somewhere around $177k. Subtract your “down payment” and now we are back to where you started. The Lender (Fremont) in order to make your loan more acceptable to future investors split your purchase into two loans. 80% of the purchase price in one loan and 20% in another loan at much higher rate because your Fico score “indicates” that you are a risk. This is called a piggyback and its common.

    The real question is did any of these companies exceed the State Lending Laws in the amount of fees they charges. That is what I would be looking at. Oh, one last point. Freemont is the main culprit here. While your broker can charge an outrageous origination fee, its the lender (Freemont) that approved the loan they you got it. You should have a copy of your loan docs. How much did Homeland make? What about the Real Estate agent? Appraisal? Title? Sounds to me like everyone had a big bite.

    Hope that helps…maybe you could pass this info onto Drew Griffin and Lou Dobbs at CNN as they really portrayed a different situation.

  5. I have a similar if not worse case, but can’t get anyone to even listem to me. I owned the home outright, but had to get a mortgage due to a family illness while awaiting SSA benefits fo seven years. Wells Fargo butchered a re-fi on the sub prime, which I found out later should have been fixed. I got a second still not getting the full value of my home to get a fixed rate and then was told to hang onto the adjustable until it adjusted then oll it all into the fixed. Well alot of family deaths and illness ocured during that time so I was unable to get it all in the fix with Wachovia. I was contacted to refi the adjustable it took the guy seven months to get it refi’ed and in the proess due to his lies and falsifying information I lost the 30 year fixed and the full value was put in another adjustable at 9.25 %. Right after this happened I was injuried at work and have been for three years. I’m still awaiting surgeries, before I can even see if I can return to a job since my employer Where I was injured let me go before I had my first surgery. Even though other cities and states have gone after the companies involved in my case, Wells Fargo, Option One and American Home mortgage Servicing my state GA has advised me they have no plans to do anything. I have tried for the past 2 1/2 years to get assistance. Ihave been told by those in the mortgage industries that I was a victim of mortgage fraud, predatory lending and equity skimming. I have repeatly gone from local to federal including the FBI with the information. No one could assist me or provide any information. I was even told by a member of the Georgia bankers Assoc. that I had gone above and beyond in my due diligence and he was going to get me some help. He was going to contact a reporter and get help. Once again I heard nothing. I have filed for Ch. 7 to at least stave off the foreclosure, I had a sale date of 1/6/09, until the first tuesday in April when they can start the process again. There is alot more to the story, but it would be extremely long much longer than this comment already is. Just wish I could get someone to listen to me.

  6. All of you posting comments must read our very informative website http://www.TheOutlawLenders.com and see how much trouble this country is in as the National Banks are operating without any oversite, and are operating as a Trust. We have posted the CNN inforamtion and have valuable links and legal information. You will be shocked!

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