Brokers, appraisers, bankers, loan officers, and attorneys were all caught up in a federal sting as the Chicago-based FBI posed as buyers and sellers to uncover mortgage fraud.

The status of mortgage fraud in California, however, is a different story. (See “California mortgage frauders get the boot”)

first tuesday take: It is the fact that real estate licensees were caught in the federal net at all that is perplexing. By legislative mandate, licensees must be honest in their deals. The DRE has the initial burden of policing the entrants and those that are brought to their attention by other agents and brokers who are willing to complain about the nasty conduct of other licensees.

While snitching is generally frowned upon within the real estate industry, it is the industry’s licensees who must diligently maintain the reputation of the industry in general and in the eyes of the public with whom they deal as the gatekeepers to entry into the world of real estate. Somewhere along the line during the past boom, those that knew about the dishonest conduct of other licensees in processing loan originations did not call the DRE. Policing an industry falls mainly on those who are most concerned about the reputation of the industry—other licensees.

Re: “Mortgage fraud: 2 dozen arrested in federal sting” from The Chicago Tribune