- Saturday, June 19, 2010
Some 500 people have been arrested in a nationwide crackdown on mortgage fraud, and federal officials pointed to Las Vegas as one of the centers of the scams that pumped up home prices until the housing market bubble finally burst.
“I heard this many times,” said Scott Hunter, a Las Vegas FBI agent who has interviewed hundreds of so-called “straw buyers” lured into buying homes by unscrupulous real estate agents, brokers and loan officers. “They said, ‘Don’t let your good credit go to waste. You can purchase these properties. This is how you acquire wealth.’ ”
“What happened here was, when the party stopped and they were not able to keep inflating the prices on these houses, the whole thing collapsed.”
Nevada’s U.S. attorney, Daniel Bogden, counted 123 defendants charged, convicted or sentenced in the Silver State since March 1 as part of a national crackdown dubbed Operation Stolen Dreams. Bogden put losses in Nevada alone at almost $250 million.
In Washington, D.C., the Justice Department linked nearly 500 arrests nationwide to the crackdown. U.S. Attorney General Eric Holder called the push the largest collective enforcement effort aimed at confronting mortgage fraud.
Holder said 1,215 criminal defendants had been netted in cases that uncovered more than $2.3 billion in losses, and said the Justice Department also engaged in civil enforcement actions to recover more than $147 million in the operation.
FBI Director Robert Mueller called mortgage fraud “a risk to our economic stability” as a nation.
More than lending institutions were victimized, said Michael Gibson, a Los Angeles-based federal Housing and Urban Development inspector who has been investigating cases in Las Vegas.
Homeowners, taxpayers, reputable real estate industry officials and the Federal Housing Administration also were hurt, Gibson said. “They’re all victims in this. Every time you have a bad loan that’s FHA-insured, the federal government pays that claim amount.”
Real estate analyst Rick Sharga, of Irvine, Calif.-based RealtyTrac Inc., said places with the most foreclosures today were the most fertile places for mortgage scams during the housing boom.
“The states that had the highest fallout in foreclosure and price depreciation certainly didn’t have markets built on sound business practices,” Sharga said. “The running gag was, you’d put a home on the market at breakfast and have three offers for twice the asking price by lunch. We’re seeing the consequences of that now.”
“As soon as prices stopped going up, the whole house of cards came down,” he said.
Prosecutors and investigators said schemes typically involved straw buyers with good credit buying homes at an inflated price or obtaining loans greater than the cost of the home. The resulting cash was skimmed by the person controlling the scheme.
Homes were “flipped,” or quickly sold at inflated prices, driving up prices of comparable or neighboring homes, said Hunter, supervisor of the Las Vegas FBI white collar crime unit.
Foreclosures have decreased in Nevada during the last year, according to RealtyTrac. But the state continued to lead the nation in May, followed by Arizona, Florida, California and Michigan. One of every 66 homes in the Las Vegas area received a foreclosure filing last month.
The Justice Department said the probe announced Thursday resulted in significant criminal cases in places such as Duluth, Minn.; New Jersey and Atlanta.
Officials said that in Chico, Calif., a home builder sold houses built before the market cooled in 2006 to straw buyers at inflated prices, then rebated tens of thousands of dollars to shell companies controlled by the buyers’ agents. The lenders were unaware of the rebates. The Justice Department said that to date, 38 of the homes are in foreclosure.