WASHINGTON (4/24/12)--The total number of mortgage loan fraud suspicious activity reports (MLF SARs) increased by 31% between 2011 and 2010, mainly due to mortgage repurchase demands, the Financial Crimes Enforcement Network (FinCEN) reported.
The agency released its MLF SARs report on Monday, and FinCEN Director James Freis Jr. also discussed these latest mortgage fraud numbers and other FinCEN issues at the Mortgage Bankers Assocation's National Fraud Issues Conference on Monday.
Financial institutions submitted 92,028 MLF SARs in 2011 and 70,472 in 2010, FinCEN said. MLF SARs accounted for 12% of all SARs filed in 2011, the FinCEN report said, representing an increase from the 10% share of total shares they represented in 2010.
However, the report added, the total number of MLF SARs filed in the fourth quarter of 2011 was lower than the 2010 fourth quarter total. While it is too soon to call this a trend, Freis in the report said initial numbers for the first quarter of 2012 appear to show a continued decline in MLF SAR filings.
Around 84% of the MLF SARs reported involved amounts below $500,000, according to the FinCEN report. Some of the types of suspicious activity reported included: Overstated income on loan applications, loan workout or debt elimination attempts, questionable refinance or loan modification attempts by borrowers or others targeting distressed homeowners, and Social Security number discrepancies submitted in the original loan application and the workout request.
Income misrepresenations and invalid documents are, in some cases, being spotted and rejected before they can cause any damage, and FinCEN said the 2011 annual roundup indicates that due diligence by mortgage lenders has improved significantly since the height of the housing bubble. Financial institutions are "spotting activity that appears to be fraud before it happens and in the process, helping to prevent it," Freis said in the release.
California, Hawaii, Florida, Nevada, and the District of Columbia had the highest amounts of SAR filings, per capita.
Fries said that FinCEN's recently enacted rule that requires non-bank residential mortgage lenders and originators to establish anti-money laundering programs and file SARs "will augment FinCEN's initiatives in the mortgage fraud area." FinCEN is also considering adding "a range of consumer and commercial finance businesses" to the list of businesses that are required to file SAR reports, and will also consider regulations for settlement related businesses, Freis added in his remarks.
For the full FinCEN report and Freis's remarks, use the resource links.