By TIM PADGETT / MIAMI AND WENDY MALLOY / TAMPA Tim Padgett / Miami And Wendy Malloy / Tampa – Sun Apr 19, 1:15 am ET
Florida's Gulf Coast was crawling with shady real estate investors like Neil Husani during this decade's housing boom. According to the U.S. Attorney's office in Tampa, Husani and three co-conspirators working with his Sarasota-based Capital Force, Inc., bilked seven area banks out of $83 million in a mortgage fraud scheme. Between 2003 and 2006, they bought up dozens of properties, used false information to secure mortgages far in excess of the actual property values, then pocketed the difference, which amounted to more than $40 million. The properties went into foreclosure and the banks, as well as the surrounding communities, were left holding the bag. Two of Husani's partners recently pleaded guilty to the conspiracy; another was convicted, and Husani, whose trial is pending in the U.S., has been arrested in Jordan, where he awaits extradition.
The Capital Force case is one of the largest mortgage frauds to date in Florida, but it's just the tip of an iceberg of scams that have wrecked broad swaths of the state's reeling housing and commercial real estate market. The situation is worst along the I-4 Corridor between the Tampa and Orlando areas, where almost 30,000 homes are in foreclosure. (Lee County, in fact, has one of the nation's highest foreclosure rates, at about 12%.) In recent years, fraud - involving either property purchases like Capital Force's, or schemes that falsely promise to help desperate homeowners hang on to their houses and then take the money and run - has mushroomed. Now, the U.S. Attorney's office in the Middle District of Florida tells TIME, federal agents and prosecutors have embarked on a "surge" of mortgage and loan-modification fraud investigations that could result in more than 200 indictments this year in the Tampa region alone. "The idea is to do as many cases as we can at once," says Tampa U.S. Attorney Brian Albritton, "to clearly send a message that this is not going to be tolerated."
For too long in Florida and the U.S., however, it seemed as though the swindlers were indeed getting away with it. As early as 2004, at the height of the housing frenzy, FBI officials were warning Congress of a mortgage fraud catastrophe: firms like Capital Force were illegally "flipping" properties, often using bogus "straw buyers"; unscrupulous appraisers were inflating their values; sub-prime borrowers lied about their assets; and predatory lenders duped customers into adjustable-rate loans that turned out to be financial time bombs. But according to the Justice Department, prosecutions of cases like those actually dropped between 2000 and 2007. Because so many law enforcement resources were thrown at terrorism during the Bush Administration, federal real estate fraud cases often took a back seat. Last year, even as the crisis became apparent, the Bush Justice Department still rejected a congressional recommendation to create a mortgage fraud task force.
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This certainly doesn't look good.
