Mortgage Fraud Gangs Rampant Nationally. In MoCo Too?

Here is some excellent analysis of FBI opinion on Organized Mortgage Fraud including extensive quoting of very recent testimony by FBI Deputy Director John S. Pistole.

Mr Pistole quotes his own prescient testimony, from 2004, before the House Financial Services Sub-Committee:

If fraudulent practices become systemic within the mortgage industry and mortgage fraud is allowed to become unrestrained, it will ultimately place financial institutions at risk and have adverse effects on the stock market. Investors may lose faith and require higher returns from mortgage backed securities. This may result in higher interest rates and fees paid by borrowers and limit the amount of investment funds available for mortgage loans.

Well, things turned out rather worse than that, I must remind any readers who have forgotten the trillions of dollars of financial damage to the global economy, much of which originated due to people playing fast-and-loose with the mortgage system, loan-origination systems, and "commoditized debt obligations" ("CDO").

The media have tended to represent this as a simple lack of sufficient regulation leading inevitably to stupid people doing stupid things. But as recent FBI activity shows -- and Mr Pistole's testimony details -- this was not stupid people doing stupid things. This was well-orchestrated and intentional identification and exploitation of weaknesses in the system:

What has occurred has been far worse than predicted. Mortgage fraud and related financial industry corporate fraud have shaken the world’s confidence in the U.S. financial system. The fraud schemes have adapted with the changing economy and now individuals are preyed upon even as they are about to lose their homes.

[ ... ]

Property flipping is nothing new; however, once again law enforcement is faced with an educated criminal element that is using identity theft, straw borrowers and shell companies, along with industry insiders to conceal their methods and override lender controls.

Identity theft in its many forms is a growing problem and is manifested in many ways, including mortgage documents. The mortgage industry has indicated that personal, corporate, and professional identity theft in the mortgage industry is on the rise. Computer technology advances and the use of online sources have also assisted the criminal in committing mortgage fraud. However, the FBI is working with its law enforcement and industry partners to identify trends and develop techniques to thwart illegal activities in this arena.

Foreclosure rescue scams are particularly egregious in that fraudsters take advantage and illegally profit from other individuals’ misfortunes. As foreclosures continue to rise across the country, so too have the number of foreclosure rescue scams that target unsuspecting victims. These scams include victims losing their home equity or paying thousands of dollars in fees, and then receiving little or no services, and ultimately losing their home to foreclosure. The FBI is again working with our law enforcement and regulatory partners along with industry partners to target, disrupt and dismantle the individuals and/or companies engaging in these fraud schemes.

Pistole goes on at great length to detail FBI approaches to dealing with some of these schemes and organizations.

And last night, ABC and other network news organizations reported a significant bust of a very organized mortgage fraud gang.

---

Last month, we reported on a Shadowy Consultations Over REAL ID in Annapolis.

Subsequently, there have been extreme fast-track moves -- long overdue in our opinion -- to bring the Maryland Driver's License and State non-driver Identification cards into compliance with the national standards set forth in the REAL ID Act of 2005 which has been active law for three years.

Maryland is one of only four states in the nation -- and the only one east of the Rockies -- which grants driving licenses or ID to persons who cannot demonstrate legal presence in the USA. A recent Washington Post article details how Maryland has become the most exploited driving/ID document east of the Mississippi. For example, at least 40 illegal aliens cite a Parcel Plus mailbox store -- at 5284 Randolph Road in Rockville -- as their home address (Easy-to-Get Licenses Expose Md. to Fraud: Out-of-State Illegal Immigrants Exploit Rules, Aizenman, NC and Rein, Lisa, Washington Post page A01, March 28 2009, downloaded 2009 April 8).

Generally unreported in the local media, but very well known to law-enforcement agencies across the US and in the war-zones of Mexico's drug cartel wars, the Maryland DL/ID has been showing up as an element in an increasing number of cases, especially cases of document fraud and identity theft. Maryland's excessive liberality and lax documentary requirements have turned the State DL/ID into the best remaining bet for criminals -- especially illegal alien criminals from at least 50 nations -- seeking a plausible document to use as a basis for extensive frauds, as well as a permit to drive on the roads of the USA.

So widespread has this problem become that widespread unofficial -- and in some cases, official -- reluctance to accept a Maryland DL/ID at face value is seen at banks, loan agencies, rental offices, and airline ticket sales offices in places as far afield as Colorado and Missouri. Simply stated, the word has gone out that you simply cannot place any faith in the Maryland DL/ID, other than that it shows that the person described has in fact passed a test of their driving skills.

---

We have reported extensively here at this site that much of the housing-bubble began here in Montgomery County, in part due to the actions of the Doug Duncan administration's luring to Montgomery of far more jobs than there was extant housing. An extremely active real-estate market existed here, and there have definitely been insufficient controls and oversight in the arenas of mortgage and loan-origination. Yet the County beamed as the market overheated past red-hot, mostly because of the largess politicians could distribute from the ballooning budget which was fed mostly by property taxes in the residential markets. Yet as overinflated was the local real-estate market, the implosion was as immense. Foreclosures in Montgomery ballooned as well, and the damage to the neighborhoods is profound.

---

Now, let's put all of this together.

Maryland's exceptionally lax -- perhaps better categorized as "grossly permissive" -- documentary basis policies will almost certainly be shown as a fundamental weakness exploited aggressively by criminals as a "basis of trust" in fraudulent activities. Indeed, we believe that exactly this problem was pointed out to Maryland Judiciary Committee members in late March by "unnamed federal officials". We believe that this soon will become widespread knowledge in the national media and finally in local media.

We believe that this laxness will be publicly shown -- through widespread criminal indictments reaching from the depths of the illegal-alien gangster community to near the highest levels of County and State officialdom -- to have enabled, fostered, and perpetuated a vast and long-lasting set of interlocking scams that grossly inflated home values and ensured the eventual collapse of the housing markets here and elsewhere, precipitating a global economic meltdown that will dog the heels of all mankind for probably the better part of a decade.

We believe that mass arrests are imminent.

And we believe that in places like Aspen Hill, North Glenmont, and parts of Germantown and Gaithersburg, the truth will finally come out about how penniless refugees from the poorest parts of the world were able to "afford" houses costing nearly half a million dollars and could even "afford" to double their size, evidently with "diverted" materiel. (See the photos in this article!)

While scammers are working the system with the knowing and willful assistance of regulatory and industry insiders and investing all of their ill-gotten gains in their own real property, their scamming has littered Montgomery County with a thousand or so foreclosures. There are literally dozens in Aspen Hill, in North Glenmont, and Germantown and Gaithersburg, and at the frequency and distribution, they are everywhere in those neighborhoods, contributing significantly to the already devastating decline in home values.

We demand action, we demand deep criminal investigation. We demand the FBI.