Come on down!

In the wake of perceptions that Florida has become a hotbed of real estate scams, the state Senate yesterday passed the second bill in two years that boosts jail terms for those convicted of real-property-related rackets. Any mortgage fraud on home loans amounting to more than $100,000 will now be prosecuted as a second- degree felony, which carries a potential jail term of up to 15 years. Just last week, one Richard Crowder was convicted of a $37 million mortgage-fraud scheme involving 17 luxury condos in South Beach, Miami. He was sentenced to nine years in prison.

This is yet another example of the politically driven process by which criminal penalties are being increased in order to allow elected officials to appeal to voters. Longer sentences for those convicted of mortgage fraud will not address the widespread economic problems that Florida – and many other states – face in the wake of the subprime mortgage meltdown. And longer sentences cost states much more money in the long run. Election-driven prosecutors refuse to negotiate the fraud-case flavor of the month, thereby costing taxpayers money in unnecessary trials. This chronic pattern of predicament solving by mandating longer criminal sentences has never worked in the past and will continue to cause many more problems than it is worth in the future. CR

March mortgage fraud madness.

On Monday, federal prosecutors in California announced indictments of 19 people for fraud and conspiracy in connection with a phony mortgage bailout and rescue plan. Federal prosecutors claim that sales agents for the ring contacted homeowners through mailings, offering financial assistance to those near foreclosure. Agents steered them into a plan that called for owners to put an “investor” on the home’s title. The homeowner then paid “rent” to the investor in an amount smaller than the original mortgage payment. In reality, the government claims, the investor was an associate or family member of the ringleaders or someone recruited via the Internet. The confusing documentation gave the investor the right to replace the homeowner on the title. Finally, the equity was stripped from the home through a new mortgage. Prosecutors say more indictments are likely as they continue their investigation into brokers, loan officers, and banks that did business with the indicted individuals.

This new spate of indictments, involving mortgage deals in some 22 states, signals how serious the DOJ is about prosecuting the fallout from the subprime mortgage meltdown. Sharon Ormsby, chief of the FBI’s fraud section, says that in the wake of the credit crisis, straw buyers are out and foreclosure scams are in. It certainly seems to me as if the field of potential charges and individuals facing serious criminal exposure will dwarf the opening brackets of the seasonal basketball classic currently in progress. CR