At large mortgage fraudsters across the nation are breathing easier today as the latest national mortgage fraud "crackdown" is officially over as of yesterday, meaning, presumably, that law enforcement is pursuing mortgage fraud less vigorously today than yesterday.

The Feds totaled up mortgage fraud arrests dating back to March 1st and still came up with a total less than 500 for the crackdown, dubbed "Operation Stolen Dreams"-- just enough so that they can say that they set a "record," surpassing the number of arrests for the previous crackdown, "Operation Malicious Mortgage," which ran from March 1st to June 18th, 2008, in which 406 defendants were charged in mortgage fraud cases. 

The end of the crackdown is scheduled at the same time as the release of the FBI's lengthy annual mortgage fraud report, which reveals very little that is not already known, but serves to bolster the impression that the Feds are on top of things.

To satisfy the contrived starting and ending dates of these crackdowns, arrests are either rushed or delayed.  A higher number of arrests are timed to coincide with the announcement to artificially create the impression of a "surge" at the end of the crackdown.  In particular, the orchestrators of these crackdowns make sure that one high-profile indictment is announced at the very end of the crackdown.  In the press release trumpeting the results of Operation Malicious Mortgage in 2008, the orchestrators of the crackdown announced the indictment of two "senior managers" of hedge funds at the failed investment bank Bear Stearns, who had allegedly known that the mortgage backed securities in their portfolios were imploding but had misrepresented them to investors as a safe investment.

The Bear Stearns fund managers were ultimately acquitted.  In other words, in the course of the entire 2008 mortgage fraud crackdown, the Feds couldn't find one single big fish that had done anything criminally wrong in a country that was absolutely awash in mortgage fraud.

This time around, the obvious big fish netted by the crackdown is former Taylor, Bean, and Whitaker chief executive Lee Farkas, who is accused of a variety of fraudulent schemes which involved passing off bad, already failed, or even duplicate, "recycled" mortgages as good mortgages so that its financial partners would lend it more money to make more mortgages.  Will Farkas be acquitted as well?

That we have had Presidential administrations change between "crackdowns" seems to be of no effect... when it comes to combating mortgage fraud, administrations of both political flavors seem to use the same tired playbook.  Meanwhile, the root causes of epidemic mortgage fraud, which really have been in place since before the 80's savings and loan crisis and have just been trending worse ever since, are still very much in place.

Well-publicized mortgage fraud crackdowns are of little effect when the underlying system of residential financing is broken and ripe for fraud-- which it is. 

We see that almost nothing has changed in our industry, for example.  Little is being done, for instance, to foster a playing field that favors ethical and independent business persons in the title industry.  A truly independent title agent has strong motive to not participate in sketchy deals and is one of the best deterrents to fraud available. 

If we restore a real estate industry where the proper business incentives are restored, the bad actors will stick out like a sore thumb-- making them fewer, less successful, and easier for law enforcement to identify and prosecute.  If we fail to do so, we can have these annual mortgage fraud crackdowns till the cows come home without things really getting better.