Cleaning up the mortgage mess

South Florida gave the country the setting for the fictional crime-fighting television series “CSI-Miami,” and now it’s giving the United States a real force for combating mortgage fraud.

For more than a year, Stephen Dibert and his company, MFI-Miami, have investigated mortgage fraud on behalf of homeowners facing the loss of their homes in Florida, where mortgage corruption and foreclosure rates count among the highest in the nation. Statewide success has inspired Dibert to expand, but there’s plenty of work still left here.

“The hyper appreciation Florida experienced during the boom attracted a lot of people who flocked to Florida and are now starving,” Dibert said.

Note: Correction appended.

According to the Mortgage Fraud Research Institute, Florida was the capital of mortgage fraud in 2006, 2007 and for the first quarter of 2008, after which Rhode Island surpassed its rate.

On the criminal side, the U.S. Attorney’s office in Miami created a mortgage fraud task force in September 2007. Since then, the Southern District of Florida has charged 236 individuals in cases involving approximately $271.5 million in fraudulent loans.

Dibert’s MFI-Miami, which he said is a play on the name of the popular TV series “CSI:Miami,” specializes in mortgage fraud investigations and forensic audits on behalf of attorneys representing homeowners facing foreclosure.

The Boynton Beach-based firm and its sister companies MFI-Boston, MFI-DC and MFI-New York search for inaccuracies, inconsistencies and outright fraud in mortgage documents — usually involving at least 70 documents per homeowner case. It’s a symptom of the layered complexities of the mortgage market collapse, and it can sometimes work to the advantage of a borrower in trouble.

Irregularities in foreclosure cases can give homeowners a negotiating edge with a lender. Dibert said in some cases, an analysis of how a loan has been traded in the secondary market can raise enough questions about the loan’s current ownership to knock down the legal standing of the lender suing to foreclose.

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Nicholas Steffens, a Coral Springs attorney who has worked with MFI-Miami, said that the irregularities investigators find give him the ammunition to negotiate with a lender to slow a foreclosure or even modify the loan. He said such information arms him against large lenders “who have a strategy to strike hard and foreclose and take everything as fast as they can.”

Now that MFI-Miami has been studying mortgages at the consumer level — the microeconomics level of understanding the mortgage default crisis — the problems are moving to an institutional level.

“We want to take our investigation a step further to the meat and potatoes of where this fraud went on and that’s Wall Street,” said Dibert.

Dibert said he hopes his work uncovers some of what he calls Wall Street’s financial shell games in the mortgage securitization process through investigations of pooling and servicing agreements, the layers of financial trading that helped create the mortgage bubble in the early 2000s. While most homeowners in mortgage trouble know their original lenders very well, the slicing and dicing of loans on the secondary market often create a tangled paper trail.

He also said the contents of the certificate that a trustee alleges contain an actual, specific mortgage are ripe fodder for his work.

MFI-Miami will try to uncover if the certificate was part of a credit default swap that may have been paid as part of the Troubled Asset Relief Program, or TARP, or by a third party. Dibert said such analysis could determine whether the lender can legitimately enforce the terms of a homeowner’s mortgage or if the lender or trustee is committing securities fraud.

“I’m very excited about starting this new service,” said Dibert. “Not only will we be able to prove or disprove the legitimacy of any claims made by the lender, but we’ll also be able to determine if the lender is trying to collect from the homeowner after already being paid with TARP funds.”

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