Two Former Bear Stearns Managers Arrested in Mortgage Crackdown

by Florida's #1 Mortgage Planner on June 19, 2008

The FBI arrested about 300 real estate industry players which included two former Bear Stearns managers, adding to the Bear Stearns problems.  The two former Bear Stearns managers were the first two executives to face criminal prosecution related to the collapse of the subprime mortgage market.

The arrests come as part of a crackdown on mortgage fraud, so is it any wonder many of the arrests have been in Miami, Florida?  All cases of mortgage fraud are believed to have contributed to the country’s housing crisis.  One law enforcement official put the total losses to homeowners and other borrowers victimized by the scheme at over $1 billion.

More than 400 people are being charged in the sting that began March 1 and ended this week, authorities said. They include industry borrowers, loan originators and real estate agents. An estimated 50 people were arrested in the last two days alone.  Across the country, reports of mortgage fraud have soared over the past year as the subprime mortgage market collapsed and defaults and foreclosures soared.

Banks reported nearly 53,000 cases of suspected mortgage fraud last year, up from more than 37,000 a year earlier and about 10 times the level of reports in 2001 and 2002, according to the Treasury Department’s Financial Crimes Enforcement Network.
The most common type of mortgage fraud was misstatement of income or assets, followed by forged documents, inflated appraisals and misrepresentation of a buyer’s intent to occupy a property as a primary residence.  Gee, that was never the case in South Florida, was it?

Over the last several months, the FBI has been investigating an estimated 1,300 mortgage fraud cases-including 19 involving subprime lending practices by U.S. financial institutions.  The government is asking for more money to combat mortgage fraud as part of larger funding to curb white collar crime.

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