FBI Expanding Fight Against Mortgage Scams
The FBI is adding a large number of agents to fight mortgage fraud and predatory lending, but will it be enough?
Speaking before the Senate Judiciary Committee last year, FBI Assistant Director Kevin L. Perkins noted that the FBI now has new funding to chase mortgage fraudsters under the Financial Intelligence Center (FIC).
The FIC, says Perkins, allows the FBI “to investigate mortgage fraud, predatory lending, market manipulation, and other financial frauds. The FIC is currently staffed with one supervisory intelligence analyst, eight staff operations specialists, and six intelligence analysts. In FY 2010, the FIC should be fully operational with a total staffing level of 58.”
This is a big jump in personnel and the effort should be welcomed but the problem concerns predatory lending.
What, exactly, is the FBI supposed to investigate? Predatory lending where a borrower is hurt by the actions of a lender is not a federal crime while mortgage fraud — where a lender is hurt — is entirely unlawful.
As an example, Smith qualifies for an FHA loan but is sold a subprime mortgage by his nearby, friendly mortgage lender. The result is that Smith pays, say, 7 percent rather than 5 percent interest and his monthly cost for a $200,000 loan goes from $1,073 for principal and interest to $1,331. That’s an additional $258 a month or $3,096 a year, a loan which is less affordable and far more likely to result in foreclosure. It’s also a loan which is fundamentally unfair given Smith’s credit and financial standing.
Why is it that unfairly taking an additional $3,100 a year from borrower Smith is lawful but robbing $20 from a convenience store is a crime? As Woody Guthrie explained, some people will rob you with a gun and some with a pen. In either case, it’s still robbery.
Under federal rules, mortgage lenders have no obligation to get the best rates and terms for borrower Smith. There is no fiduciary obligation to a borrower, no agency requirement. Unfortunately, Smith has no place to get mortgage information other than, well, mortgage lenders. Smith relies on lenders for information, advice, product options and rates.
It’s great that the FBI has more funding and will be able to field more people in the fight against financial fraud. That’s right and proper. But it’s not fair to the FBI to ask for their help in the fight against predatory lending when predatory lending is perfectly lawful under federal rules.
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