U.S. authorities have charged 1,215 people in hundreds of mortgage fraud cases that resulted in estimated losses of $2.3 billion, top Obama administration officials said on Thursday, unveiling a crackdown after the housing market collapse.
The administration has been under pressure to root out mortgage fraud and improve oversight of the housing market after the housing bubble touched off a global economic slide and led to a cascade of home foreclosures in the United States.
Over the last three-and-a-half months, authorities have made 485 arrests in the fraud cases, obtained 336 individual convictions and recovered more than $147 million, the Justice Department said.
We have seen cases that have resulted in dozens of foreclosures and millions in losses, as well as fraudsters who have bankrupted entire companies and national lenders who were not playing by the rules, said U.S. Attorney General Eric Holder.
The announcement comes a day after U.S. prosecutors unveiled charges against the former head of a now-defunct mortgage lender, Lee Farkas, for an alleged fraud scheme that led to multibillion-dollar losses.
FBI Director Robert Mueller said that authorities were pursuing more than 3,000 mortgage fraud cases, a number that has nearly doubled since 2008. He declined to comment on the pending number of cases against major institutions.
We have still a number of ongoing investigations, Mueller said. I can assure you that where we have allegations of fraud in larger institutions, we are continuing the investigations that we've started over the last several years.
Last year, the Justice Department was dealt a setback when two former Bear Stearns hedge fund managers were acquitted of various fraud charges related to two funds that were full of subprime mortgage-backed securities.
It was seen as a test case for prosecuting people for their alleged role in the financial crisis.
Even as the U.S. economy has begun to recover, including some signs of life in the housing market, an FBI report released in conjunction with the announcement of the arrests said that fraud has been on the rise.
Mortgage fraud continued to increase in 2009 despite modest improvements in various economic sectors, the report said, noting incidents of foreclosures and tighter lending practices by financial institutions.
In one case, two women were arrested on Wednesday and charged with a scheme that targeted the Haitian-American community in Florida and resulted in losses of $1.5 million to lenders from $4.4 million in fraudulent mortgage loans.
(Reporting by Jeremy Pelofsky, editing by Vicki Allen)