Mortgage fraud cases swamp FBI

An explosion of mortgage fraud cases have stretched thin FBI resources for other white-collar investigations, according to bureau officials.

FBI Director Robert S. Mueller III on Wednesday told the Senate Judiciary Committee that the number of agents investigating mortgage fraud has more than doubled in the past two years. He said 250 agents are investigating such cases, up from 120 in 2007.

“We have been shifting personnel within the criminal branch to the extent possible,” he said. “We have been using new analytical techniques to better identify trends and violators, and we have been building up existing partnerships to further enrich expertise and resources.”

After the testimony, an aide to Mr. Mueller said the bureau has had to shuffle the priorities of FBI’s 1,800-agent white-collar program to handle the crush of mortgage-fraud cases. The bureau has been forced to scale back its investigations into other types of fraud, and the FBI now requires that the cases be more serious to get involved.

The aide, who said the FBI has not pulled back investigations related to terrorism and violent crime, noted there are other law enforcement agencies that can handle fraud cases.

In Connecticut, for example, some cases that would have been investigated by the FBI are now handled by the Connecticut Financial Crimes Task Force, which includes the U.S. Postal Inspection Service, the Secret Service, the State Department Diplomatic Security Service, and state and local police.

This rise in mortgage-fraud investigations, partially the result of the collapse in housing values and the economic recession, comes as the FBI struggles to stabilize the Criminal Division, which investigates white-collar offenses such as mortgage fraud along with other federal crimes. The Criminal Division lost 2,000 agents to the National Security Division as part of the bureau’s changed priorities after the terrorist attacks of Sept. 11, 2001.

“But the logical consequence of cannibalizing our criminal resources to augment our national security efforts is that we have reduced the ability to surge resources within our criminal branch,” Mr. Mueller said. “Although we have begun an effort to rebuild our criminal resources back to our pre-9/11 levels, we still have a substantial way to go.”

Mr. Mueller said the bureau hopes to hire 850 new agents in 2009.

There will certainly be work waiting for them. Mr. Mueller said the caseload for mortgage fraud has increased in the past three years from 700 to 2,000 active investigations. In the past two years, he said, the bureau has helped to successfully prosecute between 800 and 900 mortgage fraud cases, most of which are related to property-flipping scams and people lying on mortgage applications.

“The public attention is very brief, and it would be, I think, very helpful to our overall system in this economic crisis and give public assurance,” said Sen. Arlen Specter, Pennsylvania Republican. “I have the question all the time, ‘What’s going on? Where is the accountability? Who’s going to go to jail?’”

Mr. Mueller responded by saying some cases are on a “fast track” for prosecution.

In a written statement given to the committee before his testimony, Mr. Mueller said reports of mortgage fraud increased 36 percent during 2008 for a total of 63,173 reports. The bureau has already received 28,873 complaints this year, he said.