The government's criminal enforcement efforts to combat mortgage fraud during the last few years has been focused sharply on swindlers operating in a handful of the nation's federal judicial districts, according to timely Justice Department records obtained by the Transactional Records Access Clearinghouse (TRAC).
The data show that during fiscal years 2008, 2009 and 2010, and the first three months of FY 2011, just over half of federal mortgage fraud prosecutions — 1,038 out of a total of 2,015 nationally — were filed in only ten of the nation's 90-plus districts.
The districts with the largest number of such filings relative to their population in this period are shown in Table 1. For a complete list of rankings, including figures on both prosecution and convictions, see Table 3.
The data also show that the number of mortgage fraud prosecutions has increased sharply in the last few years, with the filings in FY 2010 three times what they were in FY 2008. This may somewhat overstate the actual increase, since tracking of federal prosecutions in this area only began during 2008 and may not have fully captured all activity during that startup year. See earlier TRAC report.
Somewhat surprisingly, however, this surge has not continued in the first part of FY 2011. Although the nation's housing market still confronts multiple problems that have been exacerbated by fraudulent mortgage schemes, timely Justice Department records analyzed by TRAC show that in the first quarter of FY 2011 these filings were less than they were in the first quarter of the previous year. See Table 2 and Figure 1. Indeed, new filings for the last six months (July-December 2010) were only 338, down 40 percent from levels during the previous six months (January-June 2010) when 566 new prosecutions had been filed.
While Justice Department records track the actual number of prosecutions, there is no way to measure the full extent of mortgage fraud in the nation or to determine whether this kind of criminal activity is increasing or decreasing. But under a 1970 law, a broad range of financial institutions are required to regularly submit Suspicious Activity Reports (SARs) with the Financial Crimes Enforcement Network (FinCEN) on activities that the institutions suspect may be legally questionable. In the last few years, this indirect measure of all kinds of suspicious activities has been relatively stable and has not shown any tendency to decline: 1,290,590 in 2008, 1,281,305 in 2009 and 1,334,820 (projected) for 2010.
According to the Justice Department, the Federal Bureau of Investigation was the lead investigative agency for just under two thirds (64.2%) of these prosecutions from FY 2008 on. The other agencies in the top five each had relatively small shares. In descending order, these were the Secret Service (8.2%), the U.S. Postal Service (6.6%), the Internal Revenue Service (6.4%), and the Department of Housing and Urban Development (5.1%).
Although FBI staffing changes growing out of the terrorism attacks of 9/11/01 have resulted in the decline of all kinds of white-collar crime investigations attributed to the agency, a very recent budget document submitted to Congress says that mortgage fraud and other financial institution fraud "continues to absorb considerable FBI resources." The agency said this was necessary because its own intelligence combined with information provided by industry sources and the Special Inspector General for the Troubled Asset Relief Program together "predict an increase in foreclosures, financial institutions/firm failures, and regulatory agency/independent auditor fraud referrals."