Mortgage and Credit Crisis

As posted on June 20, 2008 on www.ajc.com

Associated Press

Georgia dropped from No. 1 in mortgage fraud in 2005 to No. 6 in the nation last year but remains a hotbed for fraudulent housing loans, officials said Thursday.

The U.S. attorney and the head of the FBI in Atlanta discussed the trends at a news conference as part of announcements on a nationwide crackdown in which 406 people have been charged since March 1, including seven Wednesday in Atlanta.

The FBI estimates $1 billion in losses nationally because of fraud related to the crackdown labeled "Operation Malicious Mortgage."

Greg Jones, special agent in charge of the FBI in Atlanta, said the agency has arrested 60 people in Georgia over the past four years in cases involving millions of dollars in losses to lenders.

Federal, state and local authorities have joined in efforts to combat "ever-growing trends that we are experiencing in mortgage fraud," Jones said.

He and U.S. Attorney David Nahmias said the illegal activity not only affects lenders but entire communities. Falsely inflated prices used to acquire fraudulent loans leave abandoned, foreclosed homes and encourage declines in the actual value of neighboring houses while driving taxes higher, they said.

Jones said straw buyers, licensed agents, attorneys and appraisers, and mortgage and banking officials have been arrested in the crackdown. The straw buyers —- people who allow their names to be used in phony purchases to obtain the loans —- may think they are making easy money just by signing documents but run the risk of prosecution and imprisonment, he said.

Much of the investigative work is done undercover to catch licensed appraisers, closing attorneys and others taking part in fraud schemes, Nahmias said.

"You're running the risk that as you think you're walking away with your fraudulent proceeds, you're going to be arrested as you walk out the door," the prosecutor said.

He warned that with foreclosures on the rise, many people can fall victim to crooks who pose as legitimate businesspersons offering help to salvage homes.

"If it sounds too good to be true, chances are it is," Nahmias said.

Georgia topped the nation in mortgage fraud three years ago but dropped to No. 3 in 2006 and sixth place last year, he said.

Meanwhile in Washington on Thursday, Deputy Attorney General Mark Filip said at an afternoon news conference: "Mortgage fraud poses a significant threat to our economy, to the stability of our nation's housing markets and to the peace of mind of millions of American homeowners."

Officials have identified 10 "mortgage fraud hot spots" nationwide in Georgia, California, Colorado, Texas, Minnesota, Michigan, Illinois, Ohio, New York and Florida.

To people who have committed fraud or are contemplating doing so, FBI Director Robert Mueller said: "We will find you, you will be investigated and you will be prosecuted."

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