U. S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT OFFICE OF INSPECTOR GENERAL. Michael H. Stolworthy Director of Fraud Prevention

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1 U. S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT OFFICE OF INSPECTOR GENERAL Michael H. Stolworthy Director of Fraud Prevention

2 ISAA C TOU SSIE

3 Robert Toussie and President Bush Isaac Toussie s father, Robert Toussie, donated $28,500 to the Republican National Committee in 2008.

4 December 23, 2008

5 Christmas Eve, 2008

6 Making Home Affordable Low Mortgage Rates and Access to Credit State and Local Housing Initiatives Tax Credits for Housing HAMP/HARP NSP HAFA 2MP FHA Short Refi FHA Loss Mitigation

7 Recovery?

8 WKYC.com Cleveland, OH Video default.aspx?bctid=

9 Inspector General Act Enacted in October 1978 Created Inspectors General in 12 of the largest Federal agencies Currently authorizes IGs in more than 50 agencies

10 HUD-OIG MISSION Prevent and detect fraud, waste, and abuse. Promote integrity, efficiency and effectiveness in HUD programs and operations. Seek administrative sanctions, civil, and/or criminal prosecution. Independent and objective reporting to the Secretary and Congress

11 HUD 2013 Budget Request $44.3 Billion CPD Public and Indian Housing FHA

12 What is the Federal Housing Administration (FHA)? The FHA is a wholly-owned government corporation created by Congress in The FHA was consolidated into HUD in FHA provides mortgage insurance on loans made by FHA-approved lenders. It is the largest mortgage insurer in the world.

13 Ups and Downs of FHA In the early 90s, FHA had about 15% of the home purchase mortgage market. Through the 90s FHA lost business to the sub-prime. By 2006 FHA market share was a marginal 3%-- and dropping. People asked if we still needed the FHA.

14 The Collapse

15 Mortgage Crisis FHA was left as the only game in town. Market conditions, new products and a Congressionally-mandated expanded role caused a resurgence in FHA s market share. Mortgage limits raised to $729,750 Now about 35% market share. In some markets, FHA loans constitute about 70% of the new loan market.

16 FHA s Resurgence Today, FHA insures million mortgages Totaling $1.1 trillion. More than 75% of First-Time Homebuyers Nearly 1/3 Minority Households. Nearly one-quarter of all refinances

17 Negative Trends 284,196 Claims Paid FY ,236 Conveyances 100,000 REO Sales 9.6 % of FHA Loans are Seriously Delinquent (739,000 loans)

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19 FHA s Impact on HUD-OIG Realignment of investigative priorities: Single Family investigations are an investigative priority. Established nationwide mortgage fraud initiatives. Special Agents participate in numerous task forces and working groups.

20 Financial Fraud Enforcement Task Force (FFETF) Created by President in November HUD-OIG is co-chair of Mortgage Fraud Working Group.

21 Mortgage Fraud Summits Miami, FL Phoenix, AZ

22 National Mortgage Fraud Team FBI/HUD-OIG/USSS/FinCEN Establish Multi-Agency Regional Task Forces and Working Groups Bring HUD FHA data, FBI Intel data and FinCEN data together Identify trends and Provide Analysis Create target packages Provide field support

23 SMART Suspicious Mortgage Activity Review and Targeting Combine FinCEN BSA Data Mortage Fraud SARs HUD-OIG Data SFDW Analyze FHA-Related Mortgage Fraud SARs

24 Trends Rescue Schemes Flopping HECMs FHA Reserve Fund Eminent Domain REO

25 Loan Modification Scams Target Desperate Homeowners - YouTube ABC News Report

26 Common Loan Modification Scams Phony Counseling or Foreclosure Rescue Schemes Fake Government Modification Programs Forensic Loan Audits Mass Joinder Lawsuits Bait & Switch Rent to Own or Leaseback Schemes Short Sale Scams Bankruptcy to Avoid Foreclosure

27 Mortgage Forensics

28 Common Language by these companies on the paperwork/websites We are not a Foreclosure Consultant we are a document preparation company We were hired to help organize your file and figure out why your submission was incomplete The fees paid are non-refundable document prep costs

29 Mass Joinder Case - California

30 Property Flipping/Flopping

31 Mortgage Fraud Trends Flopping Short sales up 33% over last year. FBI and Freddie Mac have warned that Flopping May Be on the Rise. HAFA

32 Reverse Mortgages v=cogqbgafwi4

33 Home Equity Conversion Mortgages (HECMs) Created by HUD in Allow seniors to draw equity from their homes. Major FHA product. FHA dominates HECM market.

34 What is a Home Equity Conversion Mortgage (HECM)? Most commonly known as a reverse mortgage it is a home loan that allows homeowners over age 62 to convert a portion of their equity into cash. No repayment is required until the borrower(s) no longer use the home as their principal residence. A HECM can even be used to purchase a primary residence in some cases.

35 FY 2012 HECMs 51,124 HECMs 44,714 Typical HECMs 1,335 HECM Refinances 1,487 HECMs for Purchase 3,591 HECM Savers

36 HECM Cases Florida Involves 100 properties Appraisals 1800% of actual value Two appraisers Atlanta Kelsey Torrey Hull Jonathon Kimpson

37 Ernest Leak Brooklyn Victim

38 Mutual Mortgage Insurance Fund Was 6.7% in 2007 FY %

39 REO Property Thefts story/ /theinvestigators-dirtydeeds? autostart=true&topvid eocatno=default&clipi

40 Eminent Domain

41 Forward Mortgage Crimes Continue

42 Interest Rates $400,000 Sales Price $40,000 Down Payment $360,000 Mortgage 3.5% $1,616/month $1,616/month 6.5% $255,000 Mortgage $40,000 Down $295,000 Value 26% Decrease in Value