Mortgage Fraud Crackdown Is Gathering Steam in Florida

Mortgage Fraud Crackdown Is Gathering Steam in Florida

Florida’s Gulf Coast was crawling with shady real estate investors like Neil
Husani during this decade’s housing boom. According to the U.S. Attorney’s
office in Tampa, Husani and three co-conspirators working with his
Sarasota-based Capital Force, Inc., bilked seven area banks out of $83
million in a mortgage fraud scheme. Between 2003 and 2006, they bought up
dozens of properties, used false information to secure mortgages far in
excess of the actual property values, then pocketed the difference, which
amounted to more than $40 million. The properties went into foreclosure and
the banks, as well as the surrounding communities, were left holding the
bag. Two of Husani’s partners recently pleaded guilty to the conspiracy;
another was convicted, and Husani, whose trial is pending in the U.S., has
been arrested in Jordan, where he awaits extradition.

The Capital Force case is one of the largest mortgage frauds to date in
Florida, but it’s just the tip of an iceberg of scams that have wrecked broad
swaths of the state’s reeling housing and commercial real estate market. The situation is worst along the I-4
Corridor between the Tampa and Orlando areas, where almost 30,000 homes are
in foreclosure. In recent years, fraud — involving either property purchases like Capital Force’s, or schemes that falsely promise to help desperate homeowners hang on to their houses and then take the money and run — has mushroomed. Now, the U.S. Attorney’s office in the Middle District of Florida tells TIME, federal agents and prosecutors have embarked on a “surge” of mortgage and loan-modification fraud investigations that could result in more than 200 indictments this year in the Tampa region alone. “The idea is to do as many cases as we can at once,” says Tampa U.S. Attorney Brian Albritton, “to clearly send a message that this is not going to be tolerated.”

For too long in Florida and the U.S., however, it seemed as though the
swindlers were indeed getting away with it. As early as 2004, at the height
of the housing frenzy, FBI officials were warning Congress of a mortgage fraud
catastrophe: firms like Capital Force were illegally “flipping” properties, often using bogus “straw buyers”; unscrupulous appraisers were inflating their values; sub-prime borrowers lied about their assets; and predatory lenders duped customers into adjustable-rate loans that turned out to be financial time bombs. But
according to the Justice Department, prosecutions of cases like those
actually dropped between 2000 and 2007. Because so many law enforcement resources were thrown at terrorism during the Bush Administration, federal real estate fraud cases often took a back seat. Last year, even as the crisis became apparent, the Bush Justice Department still rejected a congressional recommendation to create a mortgage fraud task force.

Now that digging the country out of its economic sinkhole has become an issue of national security, the feds are straining to play catch-up. FBI Director Robert Mueller told Congress last month that his agents are currently working more than 2,000 mortgage fraud investigations, compared to only 295 in 2003. “We still have a substantial way to go” in terms of shifting enough agents to those cases, Mueller said. Of the FBI’s 56 field offices, more than 40 now have mortgage-fraud task
forces. In Florida’s Tampa-based Middle District, as many as 50 agents have been incorporated into new task forces that include more than 10 other federal agencies, such as the Secret Service, the U.S. Postal Service, the Department of Housing & Urban Development, the Internal Revenue Service and the Federal Deposit Insurance

“Given the enormity of the problem,” says Albritton, “we wanted
to jointly organize ourselves even further to try and accelerate” the
process. Says Steven Ibison, FBI special agent in charge in Tampa, “We’re
using resources that normally would be addressing other threats in order to
surge this.” Part of the strategy is to proceed in three “waves” that move “as high up the ladder” as possible, says Ibison: to collar not just the buyers who lied on loan applications, or brokers who ushered those shams along, but also the banks and lenders who looked the other way or actively participated in the scams . That includes alleged top-level conspiracy “organizers” like Husani. “These kinds of crimes,” Ibison notes, “rarely involve just one guy.”

A big problem the feds face is that the housing crash has created a whole new slew of cases. The first stage of fraud, which helped bring about the crisis, is now being followed by a second as people scheme to buy up foreclosed homes and other properties whose prices have plummeted, or
as desperate homeowners hurry to refinance exorbitant mortgages or get their
interest rates and principals reduced. As a result, Albritton, who says the
task force is also working with industry insiders who can walk agents and
prosecutors through the arcane intricacies of mortgage fraud, hopes to clear
the decks by making as many plea deals as possible with suspects as early as
this spring. Indictments will come later in the year, and will probably be
announced all at once, “to make the largest public impact and have the
largest deterrent value.”

Florida officials are making their own surge, which is only fitting given
that appallingly lax state oversight earlier in the decade allowed just
about any crook to become a mortgage broker. Five people were busted in Miami on Thursday in a $4.5 million straw buyer scam. Florida Attorney General Bill McCollum this month filed a civil lawsuit against a number of alleged loan-modification scam artists on behalf of scores if not hundreds of
people, most of them facing foreclosure, who claim they paid upfront fees as
high as $3,000 to have their mortgage terms improved so they could keep
their homes. The suit alleges those services, which numerous non-profit
organizations will do for free in tandem with lenders, were never

One of the targets of the suit, which seeks restitution for the plaintiffs,
is Keep Your Property, Inc. The North Miami Beach firm allegedly bilked
Floridians like Leslie Brown, a 73-year-old Jamaican immigrant and former
dockworker. When faced with foreclosure on his Ft. Lauderdale home last
fall, he says he paid $2,200 along with other large fees to Keep Your
Property, which promised to get his sky-high mortgage interest rate lowered
so he could continue making house payments. “I was so happy, I was sure they
would take care of it,” says Brown, a widower who has since lost his house
and is living with a friend. “They didn’t do anything, and they took all my

Such is the state of affairs in Florida, regarded just a few years ago as
the nation’s home-buyer paradise. “We would be hard pressed to come up with
another crime that has tugged at the fabric” of Florida lives, says Ibison.
“Everyone ends up being a victim.”

View prize-winning photos of the housing crisis