The FBI frequently issues informative bulletins to explain its investigative work. This month it returned to a 2011 mortgage fraud prosecution from the Miami area. The FBI says this case “illustrates” mortgage fraud prosecutions.

Federal investigators began pursuing this case in 2008 and spent three years accumulating evidence. They finally indicted the suspect in 2011 and received a conviction several months later.

The defendant faced charges that he masterminded a massive mortgage origination scheme. In a mortgage origination scheme, a number of parties cooperate to submit deceitful mortgage applications to lenders. Generally, every party involved in a legitimate mortgage transaction must appear also appear somewhere in the scheme. This includes fake home buyers, real estate agents, mortgage brokers, and title attorneys.

In this case, the defendant paid fake buyers to participate. These “straw buyer” participants put their names on mortgage applications, claiming that the new house would be their primary dwelling. Some of these buyers filed so many fake applications that the FBI says they closed on three purchases on the same day. The applications also listed inflated property values.

Other participants in the scheme pushed the mortgage applications through the usual process, ultimately submitting the fake applications to mortgage lenders. Lenders paid out the inflated amounts and the defendant apparently kept the difference between the mortgage and the actual home value. He then rented or flipped the properties.

The FBI caught on to the scheme and investigated the defendant’s orchestrated process for submitting fake applications. While the FBI’s bulletin says this case illustrates the impact of mortgage fraud on lenders and innocent buyers, it also demonstrates how easy it is for authorities to spot and aggressively prosecute this kind of scheme. In cases like this, the FBI can allow suspects to keep digging a deeper hole while it sits back and accumulates evidence.

Source: FBI, “Mortgage Fraud: ‘House King’ Was a Royal Con Man,” Aug. 21, 2012

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