FBI Starts Investigating The Entire Mortgage Industry

The New York Times says that the FBI has begun an investigation that includes almost the entire mortgage industry—from the lenders to the brokers to the Wall Street banks who packaged the loans as securities. They’re cooperating with the SEC and wouldn’t name which firms they’re targeting, but the Times said that it includes 14 companies.

The F.B.I. has been warning for years that mortgage fraud is a significant and growing problem. In the 2006 fiscal year, it documented 35,600 suspicious-activity reports related to mortgage fraud, up from 22,000 the year before and as few as 7,000 in 2003.

Many of the cases the F.B.I. has brought so far have focused on local or regional mortgage fraud rings that involve speculators, loan officers, brokers and other housing professionals.

State officials have been active in bringing mortgage cases. The New York attorney general, Andrew M. Cuomo, is investigating whether Wall Street banks withheld damaging information about the loans they were packaging. Prosecutors in Ohio, Massachusetts, Illinois and Connecticut have also been looking into the industry.

F.B.I. Opens Subprime Inquiry [NYT]


Edit Your Comment

  1. medalian1 says:

    Funny they won’t name those 14 companies ‘eh?

  2. Tracy Ham and Eggs says:

    Scapegoating the average mortgage employee is going to do shit. The lawsuits are online gonna benefit the lawyers.

    Maybe the money spent on all this crap should go into financial education classes that people should be required before adding any new debt.

  3. HRHKingFriday says:

    A lot of law firms used to make money out of these investments, or at least the broker companies involved. I hear that some of these big firms are even starting to lay off associates (not in big numbers, but any layoffs before were absolutely unheard of). So, lesson = don’t mess law firms’ business.

  4. keith4298 says:

    Based in the recent SCOTUS ruling for Enron, it probably won’t matter to the banks that all the other entities committed fraud.

  5. axiomatic says:

    If there is any justice in the world HSBC will get sent to Gitmo.

  6. namenomore says:

    @Tracy Ham and Eggs: HA! That implies that somebody is thinking through all of this and isn’t afraid of altruism…

  7. forever_knight says:

    uh, it’s a little late you douchebags.

    how about being proactive next time?

  8. Xerloq says:

    @forever_knight: Like in Minority Report?

    I can’t wait until they get to my state.

  9. Szin says:

    Man, thank god the ‘rents finished paying off their mortgage last year.

  10. rhombopteryx says:

    Chief Wiggum: “Are we sure ALL the horses are out of the barn?”

    Lou: “Probably Chief, it’s been 3 years since the height of the real estate bubble.”

    Chief Wiggum: “Well then, I guess we have to do something… Saddle up, Lou”

  11. ooby says:

    @keith4298: That suit regarded Enron’s investors’ ability to sue complicit third parties. It does not exonerate them from criminal action.

    @Tracy Ham and Eggs: Are you suggesting that because lawyers will earn money from the investigations that these alleged crimes should be disregarded?

  12. Sherryness says:

    Between this and the home appraiser’s story from a day or so ago, I just can’t say enough how glad I am I re-thought my decision to go into home appraisal. I interned for a major home appraiser in Washington State for about a month. What I saw while I was there put such a bad taste in my mouth, I abruptly quit and never looked back. One of my better decisions in life, I think.

  13. forever_knight says:

    @xerloq: that’s an extreme example. people have been muttering mortgage fraud since the housing bubble started. how about the FBI take an interest when the issue starts, not after it has been burning for more than 12 months?

  14. lincolnparadox says:

    @Sherryness: I’m glad I didn’t buy a house 2 years ago. We figured we wouldn’t stay long enough to make it any better than renting.

    Lucky lucky.

  15. cmdr.sass says:

    Does this mean we can one day look forward to an FBI agent slapping some cuffs on Casey Serin and everyone else who was gaming the system? Probably not.

  16. sleze69 says:

    @medalian1: There’s that whole thing of “innocent until proven guilty”. Perhaps it would have benefitted the NC prosecutors who went after the Duke Lacrosse team.

  17. Tracy Ham and Eggs as played by Walter Mondale says:

    @ooby: I’m saying there are no systemic crimes. Cuomo and the city suits are money grabs for the local jurisdiction and the lawyers, not the people being foreclosed on. Im willing to put money on the fact that less then 1% of the defaults are even close to fraud (appraisals/bad docs) on the banks part. All these suits do (or have done) is make it harder for people to refi and cost good people their jobs.

  18. TechnoDestructo says:

    “What I saw while I was there put such a bad taste in my mouth, I abruptly quit and never looked back.”

    Oh, I would love to hear more about this. Do elaborate.

  19. Sherryness says:

    Well, first, he was the biggest advertiser in the yellow pages in the state. But he was, literally, working out of his garage – had it turned into an office with desks, partitions, computers, etc. Then, secondly, when I attempted to breakdown an appraisal based on things like the age of renovations, improvements, etc, he said I didn’t need to do all that because it just evened out in the end anyway. Then later I saw him take a call from a client and write down a number on a piece of paper with other information. Uncomfortable (and generally non-confrontational), I said, “In the appraisal class I took, they said that it was unethical and inadvisable to take a job if the client even hints at a number.” And he said that was not true and laughed it off. Later that day he was going over the first appraisal I was putting together and basically tore me a new one because I was too detailed couldn’t seem to make the numbers come out to what he thought they should be – even though he was only looking at the logistics of my work – and not the photos I took, measurements, nor even comparable sales in the area. After he finished yelling at me, I went back to my desk, deleted all my work, made sure my name was deleted from anything I’d touched and left for the day at the normal time. The next day I told him I would not be coming back because of the unprofessional behavior he had subjected me to and that I would prefer never to lay eyes on him again. End of story. Oh, and we only got paid a portion of the appraisal fee – and since I never completed an appraisal, I was never paid. Which is just fine with me. I wouldn’t be surprised if he gets investigated.

  20. brent_w says:

    I’m actually cheering for the FBI.

  21. deadlizard says:

    @xerloq: If they want to be proactive all they have to do is go after the credit cards.

  22. jchennav says:

    Does this mean Casey Serin is going to jail after all?

  23. artki says:

    > The lawsuits are online gonna benefit the lawyers.

    Lawsuits? Lawsuits are civil. The FBI does CRIMINAL investigations. They’re not looking to sue people, they’re looking to put people in a Federal Prison.

  24. Chigaimasmaro says:

    WHAT??? They are JUST STARTING??? My god, you mean to tell me that everything has to EXPLODE before the people in charge realize they were sitting on a powder keg? This investigative way of saving face earns NO brownie points with me. What were these individuals doing at the end of 2005 , ALL of 2006 and 2007 when these people were rolling around on the mattresses full of money?

  25. rhombopteryx says:


    Investigating the last thing that exploded (Enron, WTC) because the people in charge didn’t recognize the powder keg they were sitting on.