More than 400 real estate industry players have been indicted since March -- including dozens over the last two days -- in a Justice Department crackdown on incidents of mortgage fraud nationwide that have contributed to the country's housing crisis.
Those arrested include mortgage brokers, loan officers, home builders, realtors and attorneys.
According to the U.S. Attorney, the local cases add up to $170 million in fraudulently obtained mortgages.
Chicago ranks among the top ten cities most affected by the mortgage foreclosure crisis. Attention on the mortgage foreclosure crisis puts attention on those who may have gained from others' hardship.
Now, federal prosecutors are going after those who may have profited locally.
When federal investigators began unraveling the mortgage foreclosure crisis, they say they found fraud. On Thursday, two former managers of Bear Stearns were arrested for securities fraud. The arrests come as the federal government announces 144 mortgage fraud cases nationwide.
"Operation Malicious Mortgage focused on three types of mortgage fraud: lending fraud, foreclosure rescue schemes and mortgage related bankruptcy schemes," said Robert Mueller, FBI director.
In Chicago, federal officials say six people were arrested Wednesday and dozens of others will be ordered to appear for a variety of mortgage fraud allegations.
"Home lending has gotten, the standards got lax. The business was irresistible. More and more criminals, we believe, flocked to this opportunity," said Gary Shapiro, 1st Asst. U.S. Attorney.
"While not all foreclosures are caused by fraud, mortgage fraud has become the scourge on the American public. We have seen mortgage fraud destroying communities throughout Illinois, around the Midwest and throughout the country," said Barry McLaughlin, U.S. Housing and Urban Development.
The federal indictments include allegations of individuals trying to make money by taking advantage of the system and at times taking advantage of home owners looking for help.
In one of the dozen new cases in Chicago, Jonathan Hon of Ottawa, Illinois, is accused of defrauding lenders by submitting fraudulent loan applications on seven homes - one in River Forest, three in Oak Park and three in Chicago - then walking away with about two and half million dollars.
Hon's attorney hasn't seen the indictment but questions the timing and announcement of the indictments.
"Apparently this is part of a grander scheme. I'm skeptical why here, why now?" said Michael Petro, attorney for Jonathan Hon.
Federal officials want those who profited to pay the price, but they are also sending a message to those who may try taking advantage. Investigators say they know there are others who they haven't found yet. They say at each layer of the investigation, there were more people willing to make seemingly easy money to cross legal and ethical lines.
The FBI put the losses to homeowners and other borrowers who were victims in the schemes at over $1 billion.
"Mortgage fraud and related securities fraud pose a significant threat to our economy, to the stability of our nation's housing market and to the peace of mind to millions of Americans," Deputy Attorney General Mark Filip said in a statement Thursday. The Justice Department and FBI planed to announce the cases at an afternoon news conference in Washington.
Since March 1, 406 people have been arrested in the sting dubbed "Operation Malicious Mortgage" that saw 144 cases across the country. Sixty people were arrested on Wednesday alone, including in Chicago, Miami, Houston and a dozen other regions policed by the FBI.
In a separate sweep, two former Bear Stearns managers in New York were indicted Thursday, becoming the first executives to face criminal charges related to the collapse of the subprime mortgage market.
Across the country, reports of mortgage fraud have soared over the past year as the subprime mortgage market collapsed and defaults and foreclosures soared.
Banks reported nearly 53,000 cases of suspected mortgage fraud last year, up from more than 37,000 a year earlier and about 10 times the level of reports in 2001 and 2002, according to the Treasury Department's Financial Crimes Enforcement Network.
The most common type of mortgage fraud was misstatement of income or assets, followed by forged documents, inflated appraisals and misrepresentation of a buyer's intent to occupy a property as a primary residence.
Over the last several months, the FBI has been investigating an estimated 1,300 mortgage fraud cases -- including 19 involving subprime lending practices by U.S. financial institutions.
The Justice Department also is expected to ask Congress for more money to help combat mortgage fraud as part of a larger funding request to curb white collar crime and violent crime.
The Associated Press contributed to this report.