Cases of Mortgage Fraud Up, FBI Says

Bureau Makes Issue a Priority

The number of mortgage fraud cases investigated by the FBI almost doubled in the past three years, reflecting a problem that is "pervasive and growing," the bureau said yesterday in its annual report on financial crimes.

The FBI said its mortgage fraud cases increased to 818 in 2006 from 436 in 2003, and acknowledged that its caseload probably represents a small piece of the problem.

Mortgage fraud comes in two broad varieties. Fraud for profit is committed mostly by industry insiders and involves practices such as falsely inflating property values. Fraud for housing is committed by borrowers and involves actions such as acquiring a house under false pretenses.

Mortgage fraud is difficult to track, the FBI said, because the industry is not required to report fraud, and the sale of mortgage loans on secondary markets can "conceal or distort the fraud," thereby reducing the number of cases reported. "The true level of mortgage fraud is largely unknown," the report said.

The FBI said fighting mortgage fraud is a priority because of the impact of mortgage lending and housing on the economy.

Recently, shares of companies that lend to subprime borrowers -- people with blemished credit histories -- have been battered as delinquencies and foreclosures increase in the subprime mortgage market. HSBC, a bank based in Britain, said this week that its bad-debt charges increased 36 percent in 2006.

The FBI said it is cooperating with trade associations representing mortgage bankers and the government-sponsored companies that buy mortgages, Fannie Mae and Freddie Mac, to raise awareness of mortgage fraud.