According to the FBI’s Mortgage Fraud Report, mortgage fraud persisted at “elevated levels” during 2010. And things are not likely to improve, says the bureau, as long as market remains in its current condition. “The current housing market will likely remain an attractive environment for mortgage fraud criminals in the near future,” the report said, as criminals “seek new methods to circumvent loopholes and gaps in the mortgage lending market[1].

It is worth noting that the report does not restrict the definition of fraud to the actions of individuals, as other similar reports have done. One report earlier this year essentially qualified any short sale transaction that resulted in profit for the buyer as mortgage fraud. This report is different. It tracks bank mortgage fraud “against the nation’s homeowners”[2]. The FBI is concerned with the origination of “brand new loans or loan transfers where the banks are continuing to subject the American public to the same practices that started the meltdown in 2008.” Michael Riley, managing partner at Mitchel J. Stein & Associates LLP, commented on the report that “the FBI has found the fraudulent practices to be widespread [because] banks believe there is little chance of being caught.”

The FBI considers mortgage fraud to be a homeland security threat. How do you think this issue should be handled? Is this a slippery slope for the country since so many organizations consider basic real estate investing strategy to now be fraudulent because it leads to quick profits in a poor market?

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