The FDIC is grappling with a wave of mortgage fraud cases, FDIC Chief Sheila Bair told the National Association of Attorneys General.
It also raises concerns that newly relaxed mortgage standards designed to reignite the housing market will only spark more fraud in the future.
Cases under investigation involve potential losses of more than $7.5 billion, and many more cases are expected to open. “That's big money,” she said.
“To date we're pursuing well over a hundred home mortgage fraud cases, and investigating some 4,000 more.”
The agency, now preparing for a surge of civil cases against alleged fraudsters, is going after brokers, appraisers, loan officers, attorneys and closing agents who cheated lenders through schemes involving inflated appraisals, stolen identities, and property flipping.
Bair, however, faulted lenders for failing to supervise brokers and other third-party professionals.
“Cracking down on mortgage fraud in particular is a safety and soundness issue for both the banking industry and the housing markets,” she said.
Mortgage fraud remains a serious — and growing — problem, according last week’s report from the Financial Crimes Enforcement Network.
Suspicious Activity Reports, or SARs, that lenders file with the FBI increased 44 percent from the 12 months ending in June 2008 compared to the previous year.
“The continued rate of growth in mortgage fraud SAR filings underscores the increased vigilance and awareness of financial institutions, particularly as they continue to try to mitigate possible credit losses,” said the network’s director, James H. Freis, Jr.
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