by Amy Lillard
April 29, 2009 - Recognizing that mortgage fraud remains a major problem in the real estate market, the Senate voted this week to hire hundreds more FBI agents and prosecutors to investigate the estimated 5,000 reported allegations of fraud each month.
Senators voting for the bill, known as the Fraud Enforcement and Recovery Act, noted that predatory lending and mortgage scams helped contribute to the current housing crisis. But a new kind of fraud is on the rise today, as more and more homeowners are threatened with foreclosure and seek help. Scam artists and other perpetuators of mortgage fraud, including mortgage loan companies that are not regulated or insured by the government, are pouncing on this need.
The bill is estimated to cost $490 million over the next two years, and will dramatically increase the law enforcement power over this area. Bill supporters, including the Obama administration, say the bill will pay for itself by the fines and penalties that will result from more government investigation.
Under the new bill, an additional 160 special FBI agents and more than 200 support staff, including forensic analysts, will be hired. Today the FBI works with fewer than 250 special agents on financial fraud cases, but their caseloads have more than doubled in the past three years. Additionally, the Justice Department will hire 200 more prosecutors and civil enforcement attorneys, along with 100 support staff.
The legislation also authorizes additional funds for the Secret Service, the Housing and Urban Development Inspector General, and the Postal Inspection Service. Finally, a commission of outside experts will be established, with the subpoena power to analyze the housing crisis, make recommendations, and refer individuals and companies to the U.S. attorney general and state attorneys for wrongdoing.
The senators behind the bill are confident the new powers will help combat mortgage fraud and restore public faith in the arena.
As this bill was passed this week, another is under consideration to ban the type of predatory lending practices that precipitated the current crisis. The bill, which could be under vote next week, encourages lenders to refocus their business on traditional fixed-rate mortgages (30 year mortgage rates), and restrict subprime and other loans. The bill will also attempt to protect consumers from high interest rates by limiting the amount of money mortgage brokers can make from selling high-rate loans.
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