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FBI Investigation of Foreclosure Fraud in Florida


When Jacksonville, Florida FBI agents sent a memo to higher-ups in Washington D.C. six years ago, it could have been the discovery of what would have been the United States’ largest consumer fraud involving the mortgage industry that precipitated the financial issues. At the time, it promised to include almost every major U.S. bank due to the practices of using fake documents to evict people illegally. Despite the investigation that included dozens of forensic examiners and agents, 75 conducted interviews, hundreds of subpoenas, and millions of documents reviewed, there was only one conviction.

The one conviction resulted in a prison sentence due to the facilitation of the fraud scheme.

Now, in an article on Vice, through the use of the Freedom of Information Act, the company shows hundreds of documents that detail the investigations and how they were conducted. According to the documents, there were details regarding the way and why third-party companies were used by the mortgage industry to create fake documents to be presented to various courts for the 2012 National Mortgage Settlement. This case resulted in billions in civil fines paid by the large banks for conduct that were described as “unlawful.” The Jacksonville FBI agents had it known nearly two years prior.

The FBI had documents used to create mortgage-backed securities (MBS) from normal, ordinary mortgages during the housing bubble, during which banks combined thousands of mortgages to convert into MBS. Then, through various intermediaries, the mortgages were transferred into a trust which paid investors using revenue created by the monthly payments of homeowners. When it was all said and done, the MBS market collapsed due to the increase in homeowner defaults and the worldwide financial system almost collapsed with it. This wasn’t the only problem, though.

The FBI investigation shows the chain of ownership, which is necessary when financial institutions attempt to foreclose on a homeowner. Like any other accusation when you are trying to take action; in order to do so, you must have proof before you can do so. Financial institutions needed to show that the mortgages were transferred properly from the originator, through the intermediaries, and to the trusts. Every change along the chain must be detailed, but the FBI agents cite that the mortgage transfers were not done properly because of three reasons.

  1. The volume and amounts of the loans would make each file transfer too time-consuming.
  2. The costs of each transfer — around $35 – $50 — would have been too much.
  3. The trusts did not recognize a need to secure any of the loans, unaware of them ever needing to be called into question.

According to the memo from the Jacksonville FBI, the fraud occurred when the trusts reported that they had clear titles to the properties to credit rating agencies, investors, and the Securities and Exchange Commission (SEC). The reality is they didn’t and there was evidence that third-party outfits were hired by the mortgage-servicing companies and their legal teams to create fake mortgage documents allowing them to foreclose on the homeowner.

Despite claims by the Justice Department that they reserved the right to prosecute anyone who was suspected of wrongdoing, this still hasn’t happened.

The article on Vice details the entire specifics of the documents released, including those by others involved such as DocX. You can read the entire article to learn more about how the FBI investigation discovered the orchestrated scheme and what it means. A book was released by David Dayen on the matter titled Chain of Title: How Three Ordinary Americans Uncovered Wall Street’s Great Foreclosure Fraud.