Friday, June 27, 2008

White Collar - Mortgage Fraud Rampant in South Florida

Florida ranks first in the country in mortgage fraud and second in foreclosures. Much of the fraud has taken place in South Florida. During the real estate bubble, phony sales and dissemination of false information was common place. Because the prices of real estate kept rising, the underlying fraud did not come to light because all parties made money on the transactions. Moreover, the rising prices of subsequent sales kept the fraud hidden. However, now that the air has escaped from the bubble, these fraudulent transactions are becoming more evident. In addition, because there was underlying fraud in real estate transactions, a number of the foreclosures now taking place in South Florida also involve fraud.

State and federal investigators have assembled task forces to investigate and prosecute the fraud. Miami-Dade established a task force last year. The Broward state attorney's office also has organized a task force. Additionally, the U.S. Attorney for the Southern District of Florida has established a multi-agency task force within the last year. The federal task force includes agents from the FBI and IRS.

While law enforcement officials hope that the task forces are able to bring a large number of prosecutions against real estate con artists, the large number of potential cases may mean that a substantial number of fraudsters escape prosecution. It is a time consuming and paper intensive investigation to bring mortgage, real estate, and foreclosure fraud cases. It will be interesting to see how successful the prosecution efforts are.

For a further discussion of the issue please see the Daily Business Review, "Too Many Crooks," p. A1, June 11, 2008.

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