“No Income-No Asset” Mortgage Programs Were Abused By Mortgage Brokers And Mortgage Lenders And Targeted Hispanics Borrowers

5 01 2009

Another problem was so-called NINA — no income, no assets — loans. They were originally intended for self-employed people of means. But Freddie Mac executives worried about abuse, according to documents obtained by Congress…

The program “appears to target borrowers who would have trouble qualifying for a mortgage if their financial position were adequately disclosed,” said a staff memo to Freddie Mac Chairman Richard Syron. “It appears they are disproportionately targeted toward Hispanics.”

 

http://online.wsj.com/article/SB123111072368352309.html?mod=googlenews_wsj

 

 

 

 

Mortgage brokers became a key portion of the lending pipeline. Phi Nguygn, a former broker, worked at two suburban Washington-area firms that employed hundreds of loan originators, most of them Latino. Countrywide and other subprime lenders sent account representatives to brokerage offices frequently, he says. Countrywide didn’t respond to calls requesting comment.

Representatives of subprime lenders passed on “little tricks of the trade” to get borrowers qualified, he says, such as adding a borrower’s name to a relative’s bank account, an illegal maneuver. Mr. Nguygn says he’s now volunteering time to help borrowers facing foreclosure negotiate with banks.

Many loans to Hispanic borrowers were based not on actual income histories but on a borrower’s “stated income.” These so-called no-doc loans yielded higher commissions and involved less paperwork.

Another problem was so-called NINA — no income, no assets — loans. They were originally intended for self-employed people of means. But Freddie Mac executives worried about abuse, according to documents obtained by Congress. The program “appears to target borrowers who would have trouble qualifying for a mortgage if their financial position were adequately disclosed,” said a staff memo to Freddie Mac Chairman Richard Syron. “It appears they are disproportionately targeted toward Hispanics.”

Freddie Mac says it tightened down-payment requirements in 2004 and stopped buying NINA loans altogether in 2007.

“It’s very hard to get in front of a train loaded with highly profitable activities and stop it,” says Ronald Rosenfeld, chairman of the Federal Housing Finance Board, a government agency that regulates home loan banks.

Regions of the country where the housing bubble grew biggest, such as California, Nevada and Florida, are heavily populated by Latinos, many of whom worked in the construction industry during the housing boom. When these markets began to weaken, bad loans depressed the value of neighboring properties, creating a downward spiral. Neighborhoods are now dotted with vacant homes.

By late 2008, one in every nine households in San Joaquin County, Calif., was in default or foreclosure — 24,049 of them, according to Federal Reserve data. Banks have already taken back 55 of every 1,000 homes. In Riverside, Calif., 66,838 houses are owned by banks or were headed in that direction as of October. In Prince William County, Va., a Washington suburb, 11,685 homes, or one in 11, was in default or foreclosure.

Gerardo Cadima, a Bolivian immigrant who works as an electrician, bought a home in suburban Virginia for $330,000, with no money down. “I said this is too good to be true,” he recalls. “I’m 23 years old, with a family, buying my own house.”

When work slowed last year, Mr. Cadima ran into trouble on his adjustable-rate mortgage. “The payments were increasing, and the price of the house was starting to drop,” he says. “I started to think, is this really worth it?” He stopped making payments and his home was sold at auction for $180,000.

In the wake of the housing slump, some participants in the Hispanic lending network are expressing second thoughts about the push. Mr. Sandos, head of Nahrep, says that some of his group’s past members, lured by big commissions, steered borrowers into expensive loans that they couldn’t afford.

Nahrep has filed complaints with state regulators against some of those brokers, he says. Their actions go against Nahrep’s mission of building “sustainable” Latino home ownership.

These days, James Scruggs of Northern Virginia Legal Services is swamped with Latino borrowers facing foreclosure. “We see loan applications that are complete fabrications,” he says. Typically, he says, everything was marketed to borrowers in Spanish, right up until the closing, which was conducted in English.

“We are not talking about people working for the World Bank or the IMF,” he says. “We are talking about day laborers, janitors, people who work in restaurants, people who do babysitting.”

Two such borrowers work in Mr. Scrugg’s office. Sandra Cardoza, a $28,000-a-year office manager, is now $30,000 in arrears on loans totaling $370,000. “Her loan documents say she makes more than me,” says Mr. Scruggs.

Nahrep agents are networking on how to negotiate “short sales” to banks, where Hispanic homeowners sell their homes at a loss in order to escape onerous mortgages. The association has a new how-to guide: “The American Nightmare: Strategies for Preventing, Surviving and Overcoming Foreclosure.”

 
 

 

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Washington Mutual Mortgage Operation Encouraged Fraud And Misrepresentation As Part Of Push To Produce Profits

30 12 2008

 

If you were alive, they would give you a loan. Actually, I think if you were dead, they would still give you a loan.”

WaMu pressed sales agents to pump out loans while disregarding borrowers’ incomes and assets, according to former employees. The bank set up what insiders described as a system of dubious legality that enabled real estate agents to collect fees of more than $10,000 for bringing in borrowers, sometimes making the agents more beholden to WaMu than they were to their clients.

WaMu gave mortgage brokers handsome commissions for selling the riskiest loans, which carried higher fees, bolstering profits and ultimately the compensation of the bank’s executives. WaMu pressured appraisers to provide inflated property values that made loans appear less risky, enabling Wall Street to bundle them more easily for sale to investors.

 

http://www.nytimes.com/2008/12/28/business/28wamu.html?_r=1&hp=&adxnnl=1&adxnnlx=1230591825-HlE0eyNm%20w8Xjj6qqNdoOg&pagewanted=print

As a supervisor at a Washington Mutual mortgage processing center, John D. Parsons was accustomed to seeing baby sitters claiming salaries worthy of college presidents, and schoolteachers with incomes rivaling stockbrokers’. He rarely questioned them. A real estate frenzy was under way and WaMu, as his bank was known, was all about saying yes.

Yet even by WaMu’s relaxed standards, one mortgage four years ago raised eyebrows. The borrower was claiming a six-figure income and an unusual profession: mariachi singer. Mr. Parsons could not verify the singer’s income, so he had him photographed in front of his home dressed in his mariachi outfit. The photo went into a WaMu file. Approved.

“I’d lie if I said every piece of documentation was properly signed and dated,” said Mr. Parsons, speaking through wire-reinforced glass at a California prison near here, where he is serving 16 months for theft after his fourth arrest — all involving drugs.

While Mr. Parsons, whose incarceration is not related to his work for WaMu, oversaw a team screening mortgage applications, he was snorting methamphetamine daily, he said.

“In our world, it was tolerated,” said Sherri Zaback, who worked for Mr. Parsons and recalls seeing drug paraphernalia on his desk. “Everybody said, ‘He gets the job done.’ ”

At WaMu, getting the job done meant lending money to nearly anyone who asked for it — the force behind the bank’s meteoric rise and its precipitous collapse this year in the biggest bank failure in American history.

Interviews with two dozen former employees, mortgage brokers, real estate agents and appraisers reveal the relentless pressure to churn out loans that produced such results. While that sample may not fully represent a bank with tens of thousands of people, it does reflect the views of employees in WaMu mortgage operations in California, Florida, Illinois and Texas.

According to these accounts, pressure to keep lending emanated from the top, where executives profited from the swift expansion — not least, Kerry K. Killinger, who was WaMu’s chief executive from 1990 until he was forced out in September.

 

Between 2001 and 2007, Mr. Killinger received compensation of $88 million, according to the Corporate Library, a research firm. He declined to respond to a list of questions, and his spokesman said he was unavailable for an interview.

During Mr. Killinger’s tenure, WaMu pressed sales agents to pump out loans while disregarding borrowers’ incomes and assets, according to former employees. The bank set up what insiders described as a system of dubious legality that enabled real estate agents to collect fees of more than $10,000 for bringing in borrowers, sometimes making the agents more beholden to WaMu than they were to their clients.

WaMu gave mortgage brokers handsome commissions for selling the riskiest loans, which carried higher fees, bolstering profits and ultimately the compensation of the bank’s executives. WaMu pressured appraisers to provide inflated property values that made loans appear less risky, enabling Wall Street to bundle them more easily for sale to investors.

“It was the Wild West,” said Steven M. Knobel, a founder of an appraisal company, Mitchell, Maxwell & Jackson, that did business with WaMu until 2007. “If you were alive, they would give you a loan. Actually, I think if you were dead, they would still give you a loan.”

‘If Ms. Zweibel doubted whether customers could pay, supervisors directed her to keep selling, she said.

“We were told from up above that that’s not our concern,” she said. “Our concern is just to write the loan.”

The ultimate supervisor at WaMu was Mr. Killinger, who joined the company in 1983 and became chief executive in 1990. He inherited a bank that was founded in 1889 and had survived the Depression and the

savings and loan

scandal of the 1980s.





Mortgage Brokers And Mortgage Bankers Pushed Subprime Loans To Borrowers Because There Was No Risk To Lenders As Loans Were Sliced Up And Sold Off Quickly

26 12 2008

Subprime depended basically on brokers who did not care whether the borrower could pay his loan because they got paid their commission at closing, on banks that also did not care much whether the borrower could pay since the loan was being sold off, on packagers of loans who cut and sliced the packages of loans so that some could be called AAA rated loans (generally called CMO’s).

http://seekingalpha.com/article/112297-was-subprime-lending-just-as-dishonest-as-madoff?source=email

 

 

Subprime is a specific type of transaction more generally called CMO’s (Collateralized Mortgage Obligations) and CDS (Credit Default Swaps). Subprime depended basically on brokers who did not care whether the borrower could pay his loan because they got paid their commission at closing, on banks that also did not care much whether the borrower could pay since the loan was being sold off, on packagers of loans who cut and sliced the packages of loans so that some could be called AAA rated loans (generally called CMO’s). They paid credit rating companies to put triple A ratings which could not possibly be justified with any analysis of the underlying package of loans. Finally, they paid credit insurance companies to give guarantees (Credit Default Swaps) that they would cover any default when the credit insurance companies did not have the financial ability to pay if called on to pay. To make it even better, everyone seems to have had the idea that real estate prices would always go up. Finally, we even had President Bush saying all this was good because we were increasing housing without looking at the inevitable results.

 

1.     Financial Results: There was never a history of the returns. Financial institutions and their sales representatives told everyone that this was an exceptional investment. They talked about a piece of paper that is “triple A rated “and “guaranteed by insurance through Credit Default Swaps.” While Madoff peddled dishonest results, here banks peddled a dishonest idea without any results.

2.     Public Explanation of the process: Salesmen only explained these were triple AAA rated investments “structured so that they could not fail.” Furthermore, there was an insurance guarantee just in case. When it all fell apart, we naturally got the obvious truth that the so called protection never existed in reality. When the problem was obvious, Merrill Lynch (MER) sold these triple A rated bonds with insurance guarantees for 22 cents on the dollar and most people said the real value for Merrill was only 5 cents on the dollar. Madoff’s explanation was no phonier than the banks explanation of the value of Subprime triple A rated with CDS guarantees.

3.     What kept the fraud going? While Madoff had to pay out early investors, this fraud did not even depend on really paying investors off. The only ones who really collected on this were the bankers who earned bonuses or a percent of the profits (which can be 40% of the transactions’ profits) when these subprime loan packages were sold. The finance community had never made so much money on an idea like this. Who was going to say that it would not work? Here is a clear case that the personal greed of the bankers led to their own demise and that of their investors. Probably anyone that wanted to cut back on the system was probably told to shut up. As a former banker, I know the pressures put on people. “X bank is making all that money. What is wrong with you?” If you try to say it is a bad idea, most people get run over by the system. Years ago, former Fed Chairman Greenspan said that he trusted the bankers to protect their own interests. He recently said in congress that he made a terrible mistake in this assumption. And in this simple mistaken assumption, we see a root cause of the problem.

4.     Professional Opinion: The personal interest of bankers led them to tell all their investors that this is a splendid investment. In this case, the professional bankers did a 20 times greater disservice to themselves and their customers than all of the Madoff salesmen.

 

 

 

 





Investment Bankers And Predatory Lenders Combined To Make Risky, Deceptive Mortgage Loans To Naïve Home Buyers Who Purchased Homes They Couldn’t Afford

17 12 2008

“…The widespread securitization of mortgages prompted lenders to give virtually anyone a loan that they could resell at a profit while offloading the risk. It also gave them incentive to mislead borrowers about what they could afford, what risks they were undertaking and, in some cases, the terms of the mortgage they were signing. The public face of this racket could well be Angelo Mozilo, co-founder of mortgage giant Countrywide Financial…”

“…though the poster child of mismanagement has to be Richard Fuld, former CEO of the former company known as Lehman Bros. Fuld, who received as much as $480 million in compensation from 2000 to this year, took risks that drove the storied investment house straight into the ground…”

 

http://blogs.usatoday.com/oped/2008/12/whos-to-blame-f.html

 

Investment bankers

In the war on drugs, the top target is always the traffickers. The same principle is true with the massive implosion of credit markets and corporate ethics. In this case, the traffickers were the Wall Street firms that created bundles of subprime mortgages and other toxic financial instruments, then peddled them as low-risk, high-return investments. These securities, and enormous side bets on them, fueled the housing bubble and infected the global financial system.

Nearly all the big investment banks were culpable, though the poster child of mismanagement has to be Richard Fuld, former CEO of the former company known as Lehman Bros. Fuld, who received as much as $480 million in compensation from 2000 to this year, took risks that drove the storied investment house straight into the ground. But he had lots of co-conspirators.

Predatory lenders

Lending is easy when it is someone else’s money. The widespread securitization of mortgages prompted lenders to give virtually anyone a loan that they could resell at a profit while offloading the risk. It also gave them incentive to mislead borrowers about what they could afford, what risks they were undertaking and, in some cases, the terms of the mortgage they were signing. The public face of this racket could well be Angelo Mozilo, co-founder of mortgage giant Countrywide Financial. But many others got into this game, as well. Subprime lending shot up from $130 billion in 2000 to $625 billion in 2005.

Clueless borrowers

It might seem cruel to put blame on people who have lost their homes, or are in jeopardy of it. But hundreds of thousands of homebuyers bought more house than they could afford, or financed investment properties with no clue about what they were doing. It takes two parties to sign a mortgage contract, so some borrowers share responsibility for the housing mess.

 

 





Mortgage Brokers And Lenders Pushed OptionARM Mortgages To Good Credit Alt-A Borrowers Who Are Now Defaulting In Record Numbers

16 12 2008

“The defaults right now are incredibly high. At unprecedented levels. And there’s no evidence that the default rate is tapering off. Those defaults almost inevitably are leading to foreclosures, and homes being auctioned, and home prices continuing to fall,” Tilson explains.

 

http://www.wwj.com/A-Second-Mortgage-Disaster-On-The-Horizon-/3494300

 

The trouble now is that the insanity didn’t end with sub-primes. There were two other kinds of exotic mortgages that became popular, called “Alt-A” and “option ARM.” The option ARMs, in particular, lured borrowers in with low initial interest rates – so-called teaser rates – sometimes as low as one percent. But after two, three or five years those rates “reset.” They went up. And so did the monthly payment. A mortgage of $800 dollars a month could easily jump to $1,500.

Now the Alt-A and option ARM loans made back in the heyday are starting to reset, causing the mortgage payments to go up and homeowners to default.

“The defaults right now are incredibly high. At unprecedented levels. And there’s no evidence that the default rate is tapering off. Those defaults almost inevitably are leading to foreclosures, and homes being auctioned, and home prices continuing to fall,” Tilson explains.

“What you seem to be saying is that there is a very predictable time bomb effect here?” Pelley asks.

“Exactly. I mean, you can look back at what was written in ’05 and ’07. You can look at the reset dates. You can look at the current default rates, and it’s really very clear and predictable what’s gonna happen here,” Tilson says.

Just look at a projection from the investment bank of Credit Suisse: there are the billions of dollars in sub-prime mortgages that reset last year and this year. But what hasn’t hit yet are Alt-A and option ARM resets, when homeowners will pay higher interest rates in the next three years. We’re at the beginning of a second wave.

“How big is the potential damage from the Alt As compared to what we just saw in the sub-primes?” Pelley asks.

“Well, the sub-prime is, was approaching $1 trillion, the Alt-A is about $1 trillion. And then you have option ARMs on top of that. That’s probably another $500 billion to $600 billion on top of that,” Tilson says.

Asked how many of these option ARMs he imagines are going to fail, Tilson says, “Well north of 50 percent. My gut would be 70 percent of these option ARMs will default.”





New York Mortgage Broker Fraud Operation Found Straw Buyers For Own Properties, Inflated And Falsified Income, And Then Obtained Mortgages Which Quickly Went Into Foreclosure

13 12 2008

“…The two falsified documents to make it seem that the straw buyer made $23,000 a month – in fact, he parked cars for $22,000 a year, prosecutors said. The scheme unraveled when Poulard could no longer afford mortgage payments to the now-defunct American Brokers Conduit of Melville. She and Spindel pleaded not guilty…”

How prosecutors say the scheme worked:

1. LaDonna looked for phony buyers for three houses owned by him or his company.

2. LaDonna set the prices for the houses above their real value. The phony buyers used fake documents that say they have sufficient funds to be approved for mortgages.

3. The phony buyers obtained mortgages and completed the home sales in their names. The mortgage lenders paid LaDonna for his properties.

4. The phony buyers received $10,000 to $20,000 for participating in LaDonna’s scam. Only a few payments were made on the homes before they went into foreclosure.

 

http://www.newsday.com/news/local/suffolk/ny-limort125961867dec12,0,2469861,print.story

An ongoing probe into the home mortgage business by the Suffolk district attorney’s office has led to the indictment of a West Islip man on charges of scheming to defraud lenders out of about $2.5 million.

“What we’re seeing in Suffolk County is an explosion of fraud involving, depending on the scheme, every facet of the mortgage process,” District Attorney Thomas Spota said. The probe by Spota’s Mortgage Fraud Unit has resulted in 27 arrests and nine indictments since June.

In the latest case, Louis LaDonna, 39, pleaded not guilty Thursday to 13 counts, including grand larceny. Prosecutors accused LaDonna of inflating the value of houses in West Islip, Babylon and Lindenhurst owned by him or his company, LaDonna Properties.

But LaDonna’s attorney, William Keahon, said the case is weak. “Based upon the documents being given to me by the DA’s office and based on my own investigation, they’re never going to be able to prove what he’s accused of,” Keahon said.

Between 2006 and 2007, LaDonna contacted people who found “straw buyers” to pretend to buy the houses, prosecutors said. The straw buyers received payments of $10,000 to $20,000 for acting as if they were actually purchasing the houses.

“He [LaDonna] engaged appraisers to inflate the values of all of the properties well beyond what they were worth,” Spota said at a news conference.

Using fake documents, the phony buyers overstated their incomes and assets to qualify for no-down-payment mortgages, prosecutors said. When transactions were complete, the lenders – Mortgage-It and First Franklin Financial Corp. – paid LaDonna for the houses. But the lenders only received two or three mortgage payments before the houses went into foreclosure.

LaDonna was released on bail of $750,000 bond and is due back in court on Feb. 4.

Earlier this week, Marie Poulard, 50, of East Quogue, and Frank Spindel, 49, of Miller Place, were arrested on grand larceny charges.

Poulard needed $1.2 million to buy an East Quogue house she couldn’t afford. She and Spindel, her mortgage broker, arranged for a straw buyer to buy the house, prosecutors said.

“This is brokers making this thing work at any cost,” said Maureen McCormack, deputy chief of the economic crimes bureau in Spota’s office.





Mortgage Fraud Investigations And Prosecution Centering On Mortgage Brokers And Title Companies

11 12 2008

“Let’s not lose sight of the fact that there is immense criminal fraud involved in this financial crisis,” said U.S. Attorney McGregor Scott, whose district spans California’s vast Central Valley and is among those most affected by the housing bust. “It’s a profound ripple effect that affects everyone.”

“We are mainly focusing on the mortgage brokers and title companies because they are really at the center of mortgage fraud in this district,” said William Edwards, the acting U.S. attorney for northern Ohio.

In addition to California, large numbers of investigations are under way in Nevada, Florida, Illinois, Arizona, Atlanta and Rust Belt states such as Ohio and Michigan, the areas that have experienced the highest rates of home foreclosure.

 

http://www.google.com/hostednews/ap/article/ALeqM5ieeI0NXfkFVB7LKp1n_hYlEbeagAD95046J80

 

Prosecutors are finding buyers who created fake identities to take out home loans, brokers who paid kickbacks to ensure fraudulent mortgages were approved and lenders who took bribes and forged documents.

They are the ones who fraudulently overstated property values and borrowers’ incomes, who used illegal means to secure loans that homeowners ultimately couldn’t afford, though they had plenty of encouragement from Wall Street.

That fraud helped artificially inflate home values that have since come crashing to earth. Foreclosures are dragging down property values in neighborhoods across the nation. Lenders, in response, have shut the door on almost anyone without platinum credit, and raised a variety of fees to make up for huge losses.

And the fraud is continuing in new ways as desperate homeowners try to unload mortgages they can’t afford and builders shed surplus properties.

The U.S. Justice Department has formed more than 40 mortgage fraud task forces nationwide as prosecutors and investigators struggle with a flood of mortgage-related criminal cases. The FBI reports that its mortgage-fraud caseload has more than doubled in three years to about 1,600 investigations that have cost lenders at least $4 billion. About 200 FBI agents are assigned to the cases, up from 120 a year ago.

Nationally, federal prosecutors charged 226 people with mortgage fraud between July and the end of October, the latest figures available, said U.S. Department of Justice spokeswoman Laura Sweeney. Another 406 were charged as part of a national mortgage-fraud crackdown between March and June.

In Scott’s California district, prosecutors have filed charges related to housing scams against 53 people in 15 ongoing prosecutions. They have another 15 active investigations against 68 individuals.

They estimate hundreds of millions of dollars have been paid out by banks and other lenders because of mortgage fraud in the Central California district, which stretches from just north of Los Angeles to the Oregon border.

“We’re running out of bodies to handle these cases,” said Scott, calling on Congress to approve more money for investigators and prosecutors. “We’re just being overwhelmed.”

Spokesmen for the FBI and Justice Department said there are no plans to ask Congress for more money. They could not say how much the hundreds of agents and prosecutors are spending to investigate mortgage fraud nationwide.

“We continue to re-prioritize as necessary,” Justice spokesman Ian McCaleb said in an e-mail. “Currently, we have shifted significant resources toward investigating mortgage fraud.”

Paul Leonard, director of the California office of the Center for Responsible Lending, welcomed investigators’ attempts to keep up with newer forms of foreclosure and builder fraud. However, wrongdoing remains so widespread that “I think those agencies have to pick their spots,” he said.

“I wish they had engaged in this earlier,” Leonard said. “I think it’s constructive to sort of root out these evil and malicious scams when they occur … Given the state of the economy, it’s too little too late.”

In addition to California, large numbers of investigations are under way in Nevada, Florida, Illinois, Arizona, Atlanta and Rust Belt states such as Ohio and Michigan, the areas that have experienced the highest rates of home foreclosure.

South Florida has been a particular hotbed of activity for federal prosecutors, who have charged 112 people there with an estimated $176 million in mortgage fraud this year.

“It really is an incredible amount,” said Alicia Valle, spokeswoman for the U.S. Attorney’s office in Miami. “You name it and we’ve got it.”

Florida, California and Illinois combined to provide nearly half the nation’s fraud reports in the second quarter, according to a Dec. 2 report from the Mortgage Asset Research Institute. Nationwide, mortgage fraud reports increased 42 percent from January to March and 45 percent from April to June, compared with their year-ago periods.

“We have a duty to put these people in prison,” said Scott, the U.S. attorney in California.

Michael Cardoza, a San Francisco-area attorney representing one of those charged in central California, said prosecutors should be setting their sights higher.

“It’s amazing to me that the people on Wall Street walk away with millions and millions if not billions of dollars,” said Cardoza. “Now they’re just picking off little people … They’re doing scapegoats is what they’re doing.”

The FBI says about 80 percent of mortgage fraud losses under investigation involve industry insiders who inflated property values or made loans based on fictional information.

The remaining 20 percent is by individual borrowers who lied about their income or job history to qualify for loans. So-called “liar loans,” which require little or no documentation about the buyer’s income or employment.

The larger group is where law enforcement is focused.

“We are mainly focusing on the mortgage brokers and title companies because they are really at the center of mortgage fraud in this district,” said William Edwards, the acting U.S. attorney for northern Ohio.

U.S. Attorney Joseph Russoniello is setting the bar at $400,000 or more in his San Francisco-based district, where home values are among the nation’s highest.

“We could be looking at thousands of potential cases,” Russoniello said. “We’ve been looking at a number of cases that run the gamut from simple mortgage fraud to collusion involving brokers, appraisers … bait and switch, predatory rescue operations.”

His mortgage-fraud task force contracted with a financial analyst in October to help sort through the transactions. Russoniello expects to soon announce “a significant number” of indictments.

Nevada has the nation’s highest foreclosure rate, and now a corresponding amount of mortgage fraud complaints are flooding law enforcement agencies, said U.S. Attorney Gregory Brower. A special telephone hot line has fielded more than 1,100 calls since it was set up in April, said Nevada FBI spokesman David Staretz.

Brower has had to shuffle attorneys to handle cases like the one Nevada prosecutors say involved 432 fake buyers for 227 properties worth more than $107 million. At least 143 of the homes are now in default, costing lenders more than $17 million. Five Las Vegas brokers, mortgage agents and loan officers have pleaded guilty and six are awaiting trial.

“It’s certainly a contributor, if not the contributor, to some of the economic downturn we’re seeing,” Brower said. “It will be a while before the dust settles.”