I<\/p>\n

(By Joe Koletar and Jack Bigelow) The Federal Bureau of Investigation is easing its investigation of mortgage fraud. This is a topic receiving national attention after the recent release of a report by the Justice Department\u2019s Inspector General. The Report covers the period of 2009-2011 and indicates the FBI has downgraded mortgage fraud as an investigative priority.
\nMortgage fraud is a very serious problem, easily totaling billions of dollars a year. And it wasn\u2019t all that long ago that it was seen as one upstream factor contributing to the financial crisis that brought the United States to near financial collapse. (Bad mortgages were bundled into what turned out to be bad securities that were \u201cinsured\u201d but not underwritten.) So the obvious question is, \u201cWhy would the FBI do such a thing in light of the seriousness of the problem?\u201d
\n\u201cMortgage fraud\u201d describes a bad brew of fraudulent activities associated with mortgage sales, processing, and closings. Typical examples:
\n\u2022\tThe deliberate over-valuation of the properties in appraisals;
\n\u2022\tAttorneys winking at unfair, unethical, and even unlawful transaction provisions;
\n\u2022\tMisrepresentation of applicant information regarding loan servicing capabilities;
\n\u2022\tBrokers\u2019 fee-fishing by submitting applications from financially unfit buyers;
\n\u2022\tKickbacks to lawyers who proceed with deals appearing to be bogus from the outset.<\/p>\n

The impact of these activities is not just financial. They are crimes violating state and federal laws enacted to protect an unsuspecting public—a public that was clearly unprotected. Who knows what the ultimate cost to that public, our economy, and our financial structures was, is, and will be? Those costs, as we mention above, run into the billions.<\/p>\n

The FBI\u2019s decision is therefore puzzling and requires analysis. We\u2019ve identified at least five factors that we believe came into play in the choice to turn down the heat.<\/p>\n

1.\tThe FBI does not act on its own. No Federal agency does. Other governmental entities and institutions are entwined in the FBI\u2019s decisions, recommendations, and policies. After all, it is a federal investigating agency and so its scope is broad. Most FBI priority decisions—to be effective—require concurrence by other agencies affected by those priorities.<\/p>\n

2.\tThe events of 9\/11 changed everything. Not only our personal lives, but the priorities of the military and any number of law enforcement, intelligence, and other national securities agencies. Congress provided some budget assistance in reaction to this attack, but other programs were, of necessity, reevaluated and adjusted in the scale of post-attack priorities.<\/p>\n

3.\tThe language and structure of our criminal justice system at the Federal level is based on laws passed in the 1930s, and the FBI is dealing with a very different reality today.
\n4.\tThe volume of mortgage fraud cases that meet the legal dollar threshold justifying investigation (based on the 1930\u2019s laws) could overwhelm the resources of the FBI, a fact that demands some degree of priority-setting.
\n5.\tMortgage fraud is a diffused problem. This diffusion complicates the priority setting because it consists of many, many, instances of fraud committed in many, many, different transactions. Were the perpetrators united in easily-targetable organizations, the investigations would be more easily assigned, conducted, and prosecuted with resources justifiably budgeted for greater impact. And yet the aggregate impact of all these diffuse fraudulent activities is immense.<\/p>\n

Mortgage fraud is a wide-spread problem of significant financial impact and the FBI is apparently saying, \u201cWe have bigger fish to fry.\u201d (Implied here is that \u201cthe bigger fish are easier to catch with the size of netting we are budgeted to use\u201d.) But it is a type of white-collar crime. Our book, written with Sridhar Ramamoorti, A.B.C.\u2019s of Behavioral Forensics (Wiley, 2013) focuses on corporate fraud, but we see mortgage fraud as driven by some of the same psychological factors described in A.B.C.s of Behavioral Forensics, and for that reason, in following posts, we will consider the FBI\u2019s decision-making factors listed above in light of the realities of mortgage fraud.<\/p>\n","protected":false},"excerpt":{"rendered":"

I (By Joe Koletar and Jack Bigelow) The Federal Bureau of Investigation is easing its investigation of mortgage fraud. This is a topic receiving national attention after the recent release of a report by the Justice Department\u2019s Inspector General. The Report covers the period of 2009-2011 and indicates the FBI has downgraded mortgage fraud as […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-107","post","type-post","status-publish","format-standard","hentry","category-audit"],"_links":{"self":[{"href":"https:\/\/bringingfreudtofraud.com\/index.php?rest_route=\/wp\/v2\/posts\/107","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bringingfreudtofraud.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bringingfreudtofraud.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bringingfreudtofraud.com\/index.php?rest_route=\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/bringingfreudtofraud.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=107"}],"version-history":[{"count":1,"href":"https:\/\/bringingfreudtofraud.com\/index.php?rest_route=\/wp\/v2\/posts\/107\/revisions"}],"predecessor-version":[{"id":108,"href":"https:\/\/bringingfreudtofraud.com\/index.php?rest_route=\/wp\/v2\/posts\/107\/revisions\/108"}],"wp:attachment":[{"href":"https:\/\/bringingfreudtofraud.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=107"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bringingfreudtofraud.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=107"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bringingfreudtofraud.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=107"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}