FBI: Most Prevalent Mortgage Scam

The FBI reports that mortgage fraud continued to increase in 2006, despite increased scrutiny from both law enforcement agencies and the financial sector. Earlier this month, the bureau had a total of 938 pending mortgage-fraud investigations versus 818 at the end of last year's third quarter.

Most of the cases involve "fraud for profit" scams, which entail crooks buying a house from a legitimate seller — often using a stolen identity — then selling the property to individuals posing as buyers after a corrupt appraiser has assigned an artificially high value.

After securing a mortgage at the inflated value, the buyers then split the inflated proceeds from the fraudulent loan with the sellers. "We recognize it's a growing problem, so we've redoubled our efforts to work with the industry and other law enforcement agencies to address it," says William Stern, an FBI mortgage fraud coordinator. "We're seeing it spill over to things like organized crime and gangs, which concerns us, too."

Source: Detroit News, Bob Tedeschi