FBI: Beware of mortgage fraud

The federal law enforcement agency says reports of 'suspicious' mortgage activity could hit 70,000 this year.

May 13, 2008: 6:39 PM EDT

WASHINGTON (CNN) -- FBI officials Tuesday disclosed complaints of mortgage fraud are piling up at record levels this year, and appear certain to shatter last year's record.

Financial institutions received 33,359 "suspicious activity reports" through the first six months of the current fiscal year, which ended April 30, compared with 46,717 for the entire previous year, the FBI said.

"We could be headed for 70,000 for this year," said FBI spokesman Stephen Kodak, who acknowledged the increased complaints to be among the reasons FBI Director Robert Mueller predicted last month the mortgage fraud problem will get worse this year.

The new volume of formal complaints buttresses Mueller's public warning that "as housing prices continue to fall, more financial misdeeds will no doubt come to light."

Integrity needed: In a speech in April to the American Bar Association, Mueller called for a "culture of integrity" to combat rampant corporate fraud and other white collar crime.

He said the FBI is investigating more than 1,300 mortgage fraud cases, including 19 that involve potential crimes by corporate entities.

The FBI Tuesday also released its finalized mortgage fraud report for fiscal year 2007, which ended October 31. It showed mortgage fraud investigations increased by 47% over the previous year.

Fraud hotspots: The report also showed the 10 "hot spots" for mortgage fraud last year were generally states where real estate prices had soared most during the early 1990s.

Those hot-spot states, in order, were: Florida, Georgia, Michigan, California, Illinois, Ohio, Texas, New York, Colorado, and Minnesota.

The report also identified 10 "other states significantly affected by mortgage fraud": Arizona, Maryland, Utah, Nevada, Missouri, Indiana, Tennessee, Virginia, New Jersey and Connecticut.