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Monday, August 25, 2008

LA Times: FBI Saw Mortgage Fraud Threat in 2004

by Calculated Risk on 8/25/2008 09:11:00 AM

From the LA Times: FBI saw threat of mortgage crisis

Long before the mortgage crisis began rocking Main Street and Wall Street, a top FBI official made a chilling, if little-noticed, prediction: The booming mortgage business, fueled by low interest rates and soaring home values, was starting to attract shady operators and billions in losses were possible.

"It has the potential to be an epidemic," Chris Swecker, the FBI official in charge of criminal investigations, told reporters in September 2004. But, he added reassuringly, the FBI was on the case. "We think we can prevent a problem that could have as much impact as the S&L crisis," he said.
As the article notes, the FBI had other priorities, and they didn't really have the resources to investigate the growing epidemic of mortgage fraud, and most of the mortgage lenders didn't seem to care:
Officials said they began approaching mortgage companies and others in an attempt to raise awareness about the growing fraud problem. But the lenders had little incentive to cooperate because they were continuing to make money.
More warnings that were ignored.