Finance news

Attorney General Eric Holder announced Thursday in downtown Phoenix that Arizona will receive $1.7 million this spring to combat mortgage fraud – a prolific problem during the real estate boom that grew following the crash and ensuing recession.

The sum is more than 20 percent of the federal funds allocated by President Barack Obama to investigate and prosecute white collar criminals who continue to rip off uneducated consumers, costing the state millions in losses in the private sector, while fueling the foreclosure crises in one of the hardest hit cities in the country.

“I’m confident that these new investments will allow us to build on the recent success we’ve seen across the country and the progress that’s been made here in Arizona,” said Holder, who was among the many high profile representatives of the Financial Fraud Enforcement Task Force, which met in Phoenix for the second of a series of Mortgage Fraud Summits.

The task force, established by Obama in November, is comprised of a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement.

Holder, addressing the public and reporters at the Sandra Day O’Connor U.S. Courthouse, said in Phoenix, mortgage fraud crimes have reached crisis proportions.

“But we are fighting back,” Holder said. “Through this broad federal, state, and local coalition, we’re using every tool at our disposal – including advanced technologies, new communication platforms, and the very best talent we have – to prevent, to prosecute, and to punish mortgage fraud crimes. And we’re making meaningful progress in our work to protect families and communities, to combat discrimination in our lending markets, to recover proceeds for fraud victims, and to restore confidence in our housing and financial markets.”

Phoenix has been at the epicenter of the mortgage mess and housing bust, which obliterated entire industries, spurred thousands of job losses, sank home prices and drove banks to collapse under heavy portfolios of soured loans. A study from the Department of the Treasury’s Financial Crimes Enforcement Network ranked the Phoenix metro area fourth in the nation in Suspicious Activity Reports filed by depository institutions concerning suspected mortgage fraud. According to the U.S. Department of Housing and Urban Development, Arizona has the most homes funded by the Federal Housing Administration loans in foreclosure and consistently ranks in the top 10 in loan fraud.

Arizona ended 2009 with the nation’s second-highest home foreclosure rate, according to RealtyTrac faxless cash advances. More than 163,000 Arizona properties received foreclosure notices in 2009, about 6.12 percent of homes.

Nevada, with a 10.2 percent foreclosure rate, was the only state with a higher rate.

Task force members met with community leaders, legal services providers, law enforcement officials and banking, mortgage and real estate experts to discuss the mortgage fraud problem from a national, state and local perspective. In the morning, attendees participated in panels on mortgage fraud trends in Phoenix and the community impact. In the afternoon, task force representatives are meeting privately with law enforcement officials investigating mortgage fraud.

“We will use information gained here in Phoenix – and in other epicenters of mortgage fraud – to focus and strengthen our law enforcement activities,” Holder said. “Mortgage fraud schemes must be stopped in their tracks. And those willing to exploit our national financial crisis for personal gain will be brought to justice.

The FBI is investigating more than 2,800 mortgage fraud cases, up almost 400 percent from five years ago, Holder said. The agency estimated that mortgage fraud schemes inflict approximately $4 to $6 billion dollars in losses every year.

Last week, Attorney General Terry Goddard announced a $120,000 settlement with several defendants for their roles in a real estate scheme in Pima County. Two days earlier, Mario Bernadel, the leader of a massive fraud scheme in Phoenix, was sentenced to 17 years in federal prison.

He and his co-conspirators used fraudulent documents to buy nearly 40 properties, resulting in more than $9 million in losses to local banks.

In June 2008, the first 36 defendants were charged following a multi-agency investigation, dubbed Operation Cash Back, of mortgage fraud schemes in Arizona. The defendants included mortgage loan officers, straw buyers, real estate investors, real estate agents, and escrow officers.

The operation utilized the efforts of the U.S. Attorney’s Office, FBI, Internal Revenue Service’s Criminal Investigation Division, U.S. Immigration and Customs Enforcement, Department of Housing and Urban Development Office of the Inspector General, U.S. Marshals Service, U.S. Postal Inspection Service, U.S. Secret Service, the FDIC-OIG, Arizona Department of Financial Institutions, Arizona Attorney General’s Office, county attorneys and local police departments.

Source