Fraud & Investigations

Mortgage Fraud SARs Jump 31% as Investors Demand Loan Buybacks

Posted on Monday, July 4, 2011

A total of 25,485 suspicious activity reports (SARs) involving alleged mortgage fraud were submitted to the Financial Crimes Enforcement Network (FinCEN) during the first quarter of this year.
According to a report released by the federal agency Tuesday, that tally is up 31 percent from 19,420 in the first quarter of 2010.
FinCEN attributes the increase to more demands from investors for lenders to repurchase poorly performing mortgages, which have prompted additional loan reviews.
More than 80 percent of mortgage fraud SARs filed during the first three months of this year involved suspicious activity amounts under $500,000. The agency also noted that 86 percent referenced activities which occurred more than two years ago.
“A substantial majority of reports involved activities which occurred in 2006-2007, an indication that the industry is slowly making its way through the most problematic mortgages,” said James H. Freis, Jr., FinCEN director.
Freis says FinCEN is working closely with other federal agencies to investigate and prosecute perpetrators in order to protect consumers, as well as financial institutions. His statement paid particular focus to debt elimination scams.
In its first quarter 2011 analysis, FinCEN notes that SAR filers describe numerous fake documents and payment methods that customers and third parties submitted to financial institutions in attempts to have their mortgage obligations eliminated.
FinCEN also reported that a review of close to 70 SARs filed less than 90 days from the suspicious incident found activities such as loan modification and foreclosure rescue scams, falsified claims of identity theft, and flopping, which occurs when a foreclosed property is sold at an artificially low price to a straw buyer who quickly sells the property at a higher price and pockets the difference, often under the guise of a short sale.
FinCEN’s analysis also found that California dominated the top mortgage fraud rankings. The Golden State had the most mortgage loan fraud subjects, both in terms of the total number of reports and reports per capita.
Los Angeles ranked highest among the 50 most populous metropolitan areas, based on volume of reported mortgage fraud subjects, followed by New York, Chicago, and Miami.
FinCEN also highlighted suspected fraud targeting government sponsored mortgage relief programs. The monthly average of such incidents reported over the course of the first quarter was 230 SARs and $73 million in suspicious activity.
The most common of which consisted of discrepancies in consumer information — such as income, employment, occupancy, or social security number — submitted in the original loan and mortgage relief applications.
By: Carrie Bay DS NEWS

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