FBI had sensed an epidemic mortgage fraud
Long before the subprime mortgage crisis rocked Wall Street and gave a blow to consumer confidence, the FBI had sensed trouble in the mortgage market way back in 2004. The mortgage market had started showing signs of a probable epidemic mortgage fraud and this was predicted by an official of the FBI in charge of handling criminal investigations. The low interest rates coupled with escalating home price invited many shady real estate operators in the process.
The official had stated that they were working on it and just as they had handled the S&L crisis they would be able to deal with the probable mortgage epidemic too. The S&L crisis of 1980 cost damages worth USD$1 billion to the U.S. Government due to the collapse of approximately 1000 S&Ls.
However, it is not unknown that the damages caused by the recent mortgage crisis far exceed the loss incurred by S&L crisis of the 1980s. It is also true that FBI failed to prevent the subprime mortgage crisis it had sensed years back. Reports suggest that brokerages as well as banks had written down USD$300 billion worth of MBS or mortgage-backed securities in the last year.
Report furnished by ForeclosureRadar.com, states that in California homes worth USD$100 billion faced foreclosure in the last 2 years. The rate at which homes are facing foreclosure is 1,300 houses every working day. Majority of the people are blaming the administration for not being able to enforce regulations in a proper way. Few are also blaming the Justice Department as officials of the department are supposed to monitor that every transaction is done legally. However, the administration concentrated more on national security and didn’t give importance to white collar crimes that were striking roots rather rapidly.
To quote William K. Black, a federal regulator during S&L crisis of 1980, “The FBI correctly diagnosed that mortgage fraud was epidemic, but it did not come close to meeting its announced goal. It used everyday procedures and woefully inadequate resources to deal with an epidemic. The approach was certain to bring symbolic prosecutions and strategic defeat”.