Only two eh, not quite keeping up with our image as the fraud capital of the country. Federal authorities announced Thursday a sweeping crackdown on mortgage fraud that has led to charges against more than 400 people nationwide, including two Utahns.
The announcement, made by the U.S. Department of Justice and the FBI, involves cases pursued in just the past three months that resulted in an estimated $1 billion in losses.
State Rep. Paul Ray, R-Clinton, who has worked in recent years to pass legislation aimed at reducing mortgage fraud in Utah, applauded the agency's decision to announce the hundreds of cases at once.
"The only way to send a message to the public that there's a chance you're going to get caught is to throw 400 indictments out there at one time," Ray said.
Nationally, those charged under operation "Malicious Mortgage" include a host of people related to the real estate industry, including brokers, borrowers, lenders and even two former Bear Stearns managers in New York, who are the first executives to face criminal charges stemming from the collapse of the subprime mortgage market.
The two Utahns are Jerry C. Huff, 49, of Hurricane, and Bryan D. Conrad, 37, of Salt Lake City. Each was indicted on separate and unrelated charges relating to mortgage fraud.
Authorities say Huff lied to convince a bank to provide him with a $250,000 second mortgage on his home in Moab, a loan on which he has failed
to make payments.
According to the indictment, Huff lied about the condition and value of his home, overstated his income and submitted false documents, such as a fake appraisal, so that his loan would be approved.
The indictment also says Huff submitted copies of personal tax forms as part of his loan application when in reality he hadn't filed tax returns for those years.
Huff faces one count of wire fraud, which carries a maximum penalty of up to 20 years in federal prison; two counts of money laundering, with a potential maximum penalty of 10 years in prison for each count; and two counts of failure to file a tax return, which carries a maximum penalty of one year in prison for each count.
According to the indictment, Conrad used false identities to apply for loans. He faces two counts of bank fraud, which carries a potential penalty of up to 30 years in federal prison for each count in addition to a $1 million fine. He also faces charges of aggravated identity theft, which has a two-year mandatory minimum sentence.
Nationally, banks reported nearly 53,000 cases of suspected mortgage fraud last year, up from more than 37,000 a year earlier and about 10 times the level of reports in 2001 and 2002, according to the Treasury Department's Financial Crimes Enforcement Network.
The most common type of mortgage fraud was inflating income or assets to qualify for a loan, followed by forging documents, inflating appraisals and misrepresenting a buyer's intent to occupy a property as a primary residence. Loans based on primary residences are looked at more favorably by lenders.
Utah is ranked fifth nationally in loans showing signs of fraud or misrepresentation on a per-capita basis, based on 2007 data analyzed by the Mortgage Asset Research Institute, an affiliate of information provider ChoicePoint.
Ray said Utah needs more people to investigate and prosecute such crimes.
"This is such a big problem, we don't have enough people to deal with all of it," he said.
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