The penalty phase of the mortgage meltdown has begun in earnest, reports the Los Angeles Times. The Justice Department says that more than 400 real estate industry players have been charged since March in a federal crackdown on incidents of mortgage fraud that have contributed to the housing crisis. Those arrested included brokers, appraisers, bankers, and lenders. The FBI estimated the losses to homeowners and other borrowers who were victims of mortgage fraud at more than $1 billion. That is a small fraction of the near $1 trillion in losses worldwide that have been chalked up to the U.S. mortgage fiasco.
FBI Director Robert S. Mueller III said the number of cases of possible mortgage fraud the bureau was investigating had doubled in the last three years to more than 1,400 as of May 31. Robert Gnaizda of the Greenlining Institute in Berkeley said he feared the government would seek to make examples of mortgage brokers when the true culprits were the lenders and Wall Street firms he said had provided loans they knew were unaffordable in the long run. “Mortgage brokers only did what financial institutions allowed them to do,” Gnaizda said.