Excerpt from the SAR Activity Review Mortgage Loan Fraud
FinCEN conducted research on SARs filed by depository institutions
reporting mortgage loan fraud as the violation (in whole or in part). The
complete results of FinCEN’s study will be made available in a separate
publication. The following represents a portion of the wide-ranging findings
contained in the report:
Between 1997 and 2004, SARs filed by depository institutions reporting
mortgage loan fraud increased by 969 percent. This trend continued
with 11,509 reports of mortgage loan fraud filed in the first six months
of 2005 alone.
Monetary Value Involved
The total dollar amount of suspicious activity reported for the period between
April 1, 1996 and June 30, 2005 was $16,748,111,493. In July 2005, the
national median price for existing homes for all housing types was $218,000,
according to the National Association of Realtors. Over 58 percent of the
mortgage loan fraud reports fell into the range between $100,001 and
$500,000.
Seven of the top ten SAR filers in this study reporting mortgage loan fraud
also were listed in the top three percent of 1,506 nationally ranked U.S.-
chartered commercial banks with consolidated assets of $300 million or
more. However, this could be due to their market share in mortgage lending.
Mortgage Fraud Hot Spots
The Federal Bureau of Investigation (FBI) reports that 26 states have
significant mortgage loan fraud problems. The FBI indicates that the top
10 “hot spots for mortgage fraud are California, Colorado, Florida, Georgia,
Illinois, Michigan, Missouri, Nevada, South Carolina, and Utah.” This
ranking is based on the number of active federal law enforcement cases
involving mortgage loan fraud. SARs indicate that the largest concentration
of fraud is found in the entire eastern region of the United States. Other “hot
spots,” according to those filings, include Arizona and Texas. Enacted and
proposed laws aimed at thwarting mortgage loan fraud are a step in the right
direction.
Top Suspect Occupations Associated with Mortgage Loan
Fraud Reported
Finance-related occupations were the most commonly reported suspect
occupation associated with mortgage loan fraud with 8,345 (13.62 percent)
filings. Accountants, mortgage brokers, and lenders were included as
finance industry occupations.
Business-related occupations were the next highest reported suspect
occupation associated with mortgage loan fraud with 3,455
(5.64 percent) filings.
Types of Fraudulent Mortgage Loan Activity Reported
Falsification of the Loan Application was described in 543 (nearly 52
percent) of the sampled narratives.
Identity Theft/Fraud was described in 225 of the sampled narratives
(21 percent).
Misrepresentation of Loan Purpose or Misuse of Loan Proceeds was
described in 142 of the sampled narratives (14 percent).
Appraisal Fraud was described in 100 of the sampled narratives
(9.5 percent).
Fraudulent Flipping was specifically identified in 22 of the sampled
narratives (2 percent).
Fraud involving Multiple Loans was described in 15 of the sampled
narratives (1.4 percent).
Vulnerabilities
Modern technology such as the Internet, while providing an easy means
to submit loan applications, also helps fuel increased mortgage loan
fraud by allowing criminals to commit fraud while their identities
remain shielded.
Increased use of third-party brokers has created opportunities for
organized fraud groups.
The lack of standard regulations and educational or experience criteria
for mortgage loan brokers appears to contribute, in part, to the growth
of mortgage loan fraud.
Excerpted from SAR Activity Review Issue 10, page 13
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