FBI cracking down on mortgage fraud — and not blaming appraisers first

Last week, the Federal Bureau of Investigation (FBI) announced action against 205 individuals in the takedown of the largest nationwide enforcement operation in FBI history directed at organized groups and individuals engaged in financial institution fraud, including mortgage fraud.  The initiative, christened Operation Continued Action, “reflects the FBI’s mission and effort to identify, target, disrupt and dismantle criminal organizations and individual operations engaged in fraud schemes that target our nation’s financial institutions,” said Assistant Director Chris Swecker, FBI Criminal Investigative Division.

The FBI’s announcement includes details on five mortgage fraud actions in various parts of the country (some with cool names like “REO Flipwagon”), including arrests of mortgage brokers, closing attorneys, real estate developers, borrowers and real estate brokers.

We’re sure that among the 205 individuals being targeted, there must be some crooked appraisers – as we know, an appraiser must often be bribed or coerced into inflating a value in order for illegal flipping and other mortgage fraud schemes to work – but what we found interesting was the press coverage of the initiative, and its lack of gratuitous references to appraisers’ roles in these schemes.

CNN.com described a mortgage fraud “epidemic” that could become “the next S&L crisis,” and notes that appraisers are among the targeted, but spares us the “crooked appraisers” details.  USA Today reported the same story, mentioning flipping with fraudulent appraisals, but also identity fraud, “straw buyers” and forged documents.

Many appraisers, especially veterans of the actual S&L crisis, worry that appraisers will be the scapegoats when the mortgage fraud walls come tumbling down.  So far, the FBI and the media seem to be concentrating their attention where it belongs: on crooked speculators, developers, brokers and agents who make commissions or other profits off these fraudulent deals.