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Attacking Mortgage Fraud - July 2011

Attacking mortgage fraud is important to improving the quality of life in the Eastern District of Michigan. Metro-Detroit has been among the areas hit hardest by the economic crisis and by mortgage fraud. During the past year, the U.S. Attorney’s Office has participated in a national initiative to attack mortgage fraud called “Operation Stolen Dreams.”

Mortgage fraud is a serious problem in our community because it results in foreclosures, which reduce property values and create havens for criminal activity. I have heard it said that for every foreclosure in a neighborhood, the property values in that neighborhood go down by one percent. Mortgage fraud also harms our financial institutions, which makes it harder for the rest of us to get a home loan.

Our cases include criminals who steal the identities of elderly victims and then obtain mortgages in a victim’s name, pocketing the money, leaving the home in foreclosure, and ruining the victim’s credit rating. We also have seen cases in which unsuspecting tenants are living in homes that are part of a fraud scheme. The landlord stops making mortgage payments, but continues to collect rent. Eventually, the home goes into foreclosure and the tenant is evicted, despite paying rent each month.

At a national level, Operation Stolen Dreams was organized by the Mortgage Fraud Working Group of President Obama’s interagency Financial Fraud Enforcement Task Force. Between March and June last year, Operation Stolen Dreams involved 1,500 criminal defendants nationwide, 191 civil enforcement actions and the recovery of more than $196 million.

Here in the Eastern District of Michigan, Operation Stolen Dreams resulted in 25 individuals being charged between March and June of last year. To date, 13 of them have either pleaded guilty or have been found guilty at trial of federal offenses. Prison sentences imposed so far have been as high as 108 months in prison. Civil forfeitures totaling more than $1.5 million have been imposed. And since last June, prosecutors in this office have filed 21 new cases, charging 22 new defendants with mortgage fraud offenses.

In addition to stepping up criminal prosecutions, we have increased civil enforcement of mortgage fraud to impose significant civil monetary penalties on wrongdoers. This is one of the first U.S. Attorney’s Offices in the country to use civil enforcement to pursue mortgage fraud, and we are also are sharing the expertise that with other U.S. Attorney’s Offices around the country.
Our lawyers are using civil remedies to pursue those who defraud seniors by stealing the equity from their homes through fraudulent Home Equity Conversion Mortgages (HECMs), or so-called reverse mortgages, in which homeowners seek to take the equity out of their homes.

We have found that the most effective way to address this problem is through a coordinated effort of federal, state and local law enforcement agencies working with regulators, real estate professionals, victims’ rights organizations and lenders. They form this district’s Financial Fraud Enforcement working group, which meets regularly to encourage a multi-agency, multi-disciplinary approach to enforcement. Participating members include the Wayne and Oakland County Prosecutor’s Offices, the Federal Bureau of Investigation, the U.S. Secret Service, the Internal Revenue Service’s Criminal Investigation Division, and the Department of Housing and Urban Development’s Office of Inspector General.

In addition to supporting member initiatives, the working group shares information and identifies emerging fraud trends.

We want to raise awareness of our enforcement efforts for two reasons. First, we want to educate the public. An educated public is the most effective way to fight fraud. For homeowners who are struggling to make payments or seeking to restructure loans, is a resource to report suspicious activity or to find legitimate resources for help.

Second, we want to send an important message to criminals, that if they prey on vulnerable homeowners, they will be brought to justice.

Barbara L. McQuade
United States Attorney
Eastern District of Michigan

Updated March 20, 2015