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ALL IN
Ed Parker, the head of mortgage fraud investigation at Ameriquest, the largest
subprime lender in , , and , told the FCIC that fraudulent loans were
very common at the company. “No one was watching. The volume was up and now
you see the fallout behind the loan origination process,” he told the FCIC. David
Gussmann, the former vice president of Enterprise Management Capital Markets at
Fannie Mae, told the Commission that in one package of securitized loans his an-
alysts found one purchaser who had bought properties, falsely identifying himself
each time as the owner of only one property, while another had bought five proper-
ties. Fannie Mae’s detection of fraud increased steadily during the housing bubble
and accelerated in late , according to William Brewster, the current director of
the company’s mortgage fraud program. He said that, seeing evidence of fraud, Fan-
nie demanded that lenders such as Bank of America, Countrywide, Citigroup, and
JP Morgan Chase repurchase about million in mortgages in and mil-
lion in . “Lax or practically non-existent government oversight created what
criminologists have labeled ‘crime-facilitative environments,’ where crime could
thrive,” said Henry N. Pontell, a professor of criminology at the University of Califor-
nia, Irvine, in testimony to the Commission.
The responsibility to investigate and prosecute mortgage fraud violations falls to
local, state and federal law enforcement officials. On the federal level, the Federal Bu-
reau of Investigation investigates and refers cases for prosecution to U.S. Attorneys,
who are part of the Department of Justice. Cases may also involve other agencies, in-
cluding the U.S. Postal Inspection Service, the Department of Housing and Urban
Development, and the Internal Revenue Service. The FBI, which has the broadest ju-
risdiction of any federal law enforcement agency, was aware of the extent of the
fraudulent mortgage problem. FBI Assistant Director Chris Swecker began noticing
a rise in mortgage fraud while he was the special agent in charge of the Charlotte,
North Carolina, office from to . In , that office investigated First Bene-
ficial Mortgage for selling fraudulent loans to Fannie Mae, leading to the successful
criminal prosecution of the company’s owner, James Edward McLean Jr., and others.
First Beneficial repurchased the mortgages after Fannie discovered evidence of fraud,
but then—without any interference from Fannie—resold them to Ginnie Mae. For
not alerting Ginnie, Fannie paid . million of restitution to the government.
McLean came to the attention of the FBI after buying a luxury yacht for , in
cash. Soon after Swecker was promoted to assistant FBI director for investigations
in , he turned a spotlight on mortgage fraud. “The potential impact of mortgage
fraud is clear,” Swecker told a congressional committee in . “If fraudulent prac-
tices become systemic within the mortgage industry and mortgage fraud is allowed
to become unrestrained, it will ultimately place financial institutions at risk and have
adverse effects on the stock market.”
In that testimony, Swecker pointed out the inadequacies of data regarding fraud
and recommended that Congress mandate a reporting system and other remedies
and require all lenders to participate, whether federally regulated or not. For exam-
ple, suspicious activity reports, also known as SARs, are reports filed by FDIC-in-
sured banks and their affiliates to the Financial Crimes Enforcement Network
