Monday, August 2, 2010

FinCEN: 2009 Mortgage Loan Fraud

On July 30, 2010, the Financial Crimes Enforcement Network (FinCEN) released its 2009 Mortgage Loan Fraud (MLF) study which found the number of mortgage fraud suspicious activity reports (SARs) filed in 2009 grew 4 percent compared with the number of mortgage fraud SARs filed in 2008.

FinCEN also reported that just looking at the fourth quarter of 2009, mortgage fraud SAR filings increased 6 percent over the same period in 2008.

Consistent with recent years, 9 percent of all SARs filed in 2009 indicated MLF as an activity characterization. However, looking at just the fourth quarter, this proportion rose to 11 percent.

In addition to the increase in SAR-MLF filings, the analysis shows an increase in the prevalence of post origination loan reviews by a variety of mortgage market businesses other than mortgage lenders, such as mortgage loan purchasers, providers of mortgage insurance, insurance certificates.

The importance of quality control reviews through in-house or third-party auditors skilled in detecting potential mortgage fraud or misrepresentations is an important tool.


The report also lists where MLF SARs are most common by state, by county, and by metropolitan area (MSA). The following table shows the Metropolitan Statistical Areas with the most SAR MLF filings and the number of mortgage loan fraud SARs that were filed in 2009.

Chart-1-Top10-Fraud (2010.07.30)

The volume of SAR filings in any given period does not directly correlate to the number or timing of suspected fraudulent incidents in that period.

The numbers reported show when the suspicious activity was reported even if the activity occurred prior to 2009. FinCEN's data indicates that almost 75 percent of mortgage loan fraud SARs report suspicious activity that occurred more than one year prior to filing the SAR.

Foreclosures, repurchases, insurance investigations, and enforcement actions appear in SAR narratives as contributing factors to the ultimate discovery and reporting of suspicious activities.

Further Review

This report and related studies should be taken together with May's report entitled Loan Modification and Foreclosure Rescue Scams - Evolving Trends and Patterns in Bank Secrecy Act Reporting, released in June and which examines early results from FinCEN's April Advisory, Guidance to Financial Institutions on Filing Suspicious Activity Reports regarding Loan Modification/Foreclosure Rescue Scams in order to gain a detailed understanding of loan modification and foreclosure rescue scams.

Both of these reports are on our website.

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Mortgage Loan Fraud Update - Suspicious Activity Report Filings from October 1, 2009 to December 31, 2009. FinCEN: July 2010

Lenders Compliance Group is the first full-service, mortgage risk management firm in the country, specializing exclusively in mortgage compliance and offering a full suite of hands-on and automated services in residential mortgage banking.