The FBI said this week that it is investigating 14 companies for fraud or other violations in connection with subprime home loans in a wide-ranging investigation that began last spring. Stephen Prozeralik heads the state Office of Financial Regulation?s enforcement division, which fulfills a similar function in Maryland.
What does your unit do?
We have a compliance division which actually goes in and audits brokers and lenders. My unit is the enforcement unit; if there?s any criminal charges or complaints, we investigate those. Right now, including myself, there are eight investigators.
What are you investigating?
Each investigator has probably 10 or 11 cases they?re working on. Ever since the foreclosure crisis hit, that?s when the scammers came out. [Homeowners] get hit twice: They?re already in foreclosure, and the scammer tries to take the remaining equity on the property.
How do they do that?
The scammer [puts someone] up as the purchaser of the house. [The purchaser] usually has good credit, and they usually qualify for a much higher mortgage. They?re telling the homeowner that he can pay rent to this person, stay in the house and in a year buy it back. That sounds good, but what they don?t see [is that] they won?t be able to afford the house a year from now because the mortgage is $70,000 to $100,000 higher.
How does the FBI investigation fit into this?
[The FBI is] looking more at company executives and how they packaged the subprime mortgages. How they were sold ? was there some insider trading as things were going bad?
