More muscle sought in fraud fight

Congress is expected to direct $532 million over the next 2 years to hire more investigators and prosecutors to fight financial fraud.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Jennifer Liberto, CNNMoney.com senior writer

chart_mortgage_fraud2.gif

WASHINGTON (CNNMoney.com) -- In a move that received little notice, Congress may soon be sending to President Obama a bill to direct $532 million to investigate mortgage and securities fraud.

The bill would double the size of the mortgage fraud investigation staff at the FBI starting in the fall. The bill would also allow the government to hire more prosecutors, special agents and analysts to chase housing and corporate financial fraud.

The bill passed the Senate and House, but the Senate must still agree to some more changes (correction). President Obama is expected to sign the legislation once the final version is approved, a spokesman confirmed.

The aim is to crack down on scammers on Main Street and Wall Street.

"People are very upset about what happened and it's really important for the government to demonstrate there's a charge for doing these types of things," said Sen. Ted Kaufman, D-Del., a bill co-sponsor. "Just because someone is at a Wall Street firm or a bank, they get the same kind of justice everyone else gets."

Populist bailout rage helped push easy passage by a 367-59 vote in the House. It passed the Senate last week 92-4. On the Senate floor, lawmakers urging support for the bill said the measure would be used to investigate big banks.

Already, the FBI, Securities and Exchange Commission, the Treasury Department's special inspector general and New York attorney general have launched criminal fraud probes into companies that have received billions in taxpayer bailouts.

The funding also promises to have a much wider impact on mortgage fraud scams sweeping the nation's main streets.

Federal agencies say they're inundated with mortgage fraud cases and are starting to look into a new breed of scams from those who offer to refinance homes or save them from foreclosure.

Even as the number of newly issued mortgage loans has fallen dramatically, mortgage fraud caseloads continue to increase, said Sharon Ormsby, chief of the FBI's financial crimes unit. In the past six months, the agency has opened about 2,300 cases, nearly twice the number opened in 2007.

Ormsby acknowledges that the agency also has assigned twice the number of agents to work on mortgage fraud, which has contributed to the bigger caseload.

Federal agents are seeing the same kind of property frauds that occurred during the housing boom. One example: Banks getting duped into giving big loans by ghost buyers who disappear with the bank's money.

Criminal and civil investigators say scammers are also taking advantage of the new Obama initiative to help mortgage holders. Last month, several agencies got together to launch an inter-agency effort to fight fraud.

In one of the new scams, fraudsters collect several thousand dollars up front and then don't help homeowners get refinancing, according to Alice Hrdy, who works in the financial practices division of the Federal Trade Commission, which investigates civil fraud cases.

Hrdy said in some cases the perps are unemployed mortgage brokers who know how to operate in the industry.

"Short of the president getting up every day and saying, 'Don't fall victim,' these scams are a natural downside that's coinciding with huge numbers of unemployed workers," Hrdy said.

*An earlier version erroneously categorized the bill's status. CNNMoney.com regrets the error. To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
These 20 antique guns could fetch big bucks Morphy Auctions in Pennsylvania is putting nearly 1,000 old guns on the block. Here are just a few. More
15 execs who make more than their CEOs Sure, corporate chiefs' pay often is eye-poppingly high. But at some companies, executives lower down the ladder quietly out-earned their CEO bosses. More
Novelty gifts for people with money to burn For those who've got the cash, these holiday gifts can really make a statement. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.