Page last updated at 22:49 GMT, Thursday, 19 June 2008 23:49 UK

FBI holds 406 for mortgage fraud

A home in Virginia
The US Justice Department said the frauds had cost victims $1bn

The FBI says it has arrested 406 property market players as part of a crackdown on alleged mortgage frauds worth an estimated $1bn (500m).

The arrests include housing developers, estate agents and mortgage brokers.

Reported mortgage fraud has soared in the past year, with the most common type being mis-statement of assets.

In a separate development, two former Bear Stearns managers have been charged following the collapse of two hedge funds linked to sub-prime mortgages.

They are the first executives to face criminal charges related to the collapse of the value sub-prime loans which triggered the credit crunch.

Billion dollar losses

Mortgage fraud and related securities fraud pose a significant threat to our economy
Mark Filip, deputy US attorney general

The property market investigation, known as Operation Malicious Mortgage, relates to a number of types of alleged mortgage fraud.

"Operation Malicious Mortgage and the Bear Stearns case demonstrate that the Department of Justice is determined to detect and to punish mortgage fraud and to help restore stability and confidence in our housing and credit markets," said deputy US attorney general Mark Filip.

The Justice Department said it was pursuing 144 cases against the 406 defendants.

Sixty of them were arrested on Wednesday alone.

The Justice department estimated that the losses to homeowners and other borrowers from the mortgage frauds amounted to about $1bn (500m).

"Mortgage fraud and related securities fraud pose a significant threat to our economy, to the stability of our nation's housing market and to the peace of mind to millions of Americans," said Mark Filip.

Some of cases involve the alleged use of false employment records or the inflation of property values.

Others are looking into alleged foreclosure rescue scams which target struggling homeowners offering to help prevent them losing their home for a fee.

Reports of mortgage fraud have increased significantly over the past year. According to the US Treasury Department, banks reported almost 53,000 cases of suspected mortgage fraud in 2007, up 37,000 a year earlier.

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