Mortgage Fraud Booming Business for Gangs

Mortgage fraud is a profitable sideline to drugs

The problem of mortgage fraud is one that is growing throughout the country. While it seems to be most rampant in the Southeast, it can be seen everywhere as those who work in the lending industry have discovered that it’s quite profitable to forge a bit of information here and there in order to swindle money out of the mortgage companies.

What’s interesting about the latest developments is how the demographics of the fraud are changing. Previously, it was thought to be mostly a white collar crime perpetuated by insiders at mortgage companies, perhaps in cooperation with those who submit fraudulent appraisals. But now it appears that the crime is spreading to the street, as several gangs in the Chicago area have been discovered to be involved in the practice.

It makes sense, really, as it’s hugely profitable venture and it’s a lot less dangerous than the mainstay of gang business, which is drugs. Drugs involve smuggling and distribution issues which typically involve a lot of people. The more people that are involved, the riskier the venture becomes. Mortgage fraud, which can be committed with only a few people, is far more centralized and yields a greater profit per person involved, as many single instances of the crime provide a six figure payoff. Plus, as the authorities still tend to view the practice as a white collar crime, sentences for those who are caught are far more lenient than they are for drug offenses, particularly those committed with a firearm, which can send the perpetrator to prison for decades.

The most common method of fraud used by the gangs is that involving identity theft. By stealing the identities of people with sound credit histories, the criminals can appear to be legitimately purchasing property. The trick is that they don’t move in and don’t pay. They just take the money and leave. At least one gang has taken the ruse a bit further by having a member acquire a license as a mortgage originator. . This allows greater access to lenders and makes it easier to facilitate a loan. Having someone on the inside also makes it easier to engage in “property flipping” where a property can be sold multiple times in a short period, with the price increasing dramatically each time. Until recently, one could obtain a license as a mortgage originator in Illinois without a criminal background check. The state has cleared up this loophole and hopes that by doing so they can make it more difficult for those who intend to engage in criminal activity.

In at least one case, Chicago police caught up with the scam and arrested a suspected member of the Insane Mafia Vice Lords gang, but this is almost certainly not an isolated case. With hundreds of millions of dollars worth of lending scams perpetuated each and every year, it stands to reason that other gangs will soon jump into the fray. 

The usual precautions are in order here. Know your lenders, take care of your personal information, and watch the sales of property in your neighborhood. This is a crime that is best eliminated by diligence by everyone. And since everyone ultimately pays the price in higher fees and taxes, it’s worth while to keep an eye on the neighborhood.