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Excerpt from the Mortgage Loan Fraud: An Industry Assessment based upon Suspicious Activity Report Analysis
Securities and Futures Industries (SAR-SFs)

In this updated study, FinCEN also examined Suspicious Activity Reports by securities firms involved in the issuance and sale of mortgage-backed securities. Eighteen filers submitted 36 Suspicious Activity Report by the Securities and Futures Industries (SAR-SF) forms indicating activity involving suspected mortgage loan fraud from the mandated reporting date of January 1, 2003 through May 1, 2007. These reports were retrieved using narrative searches for the terms: “securitized loans,” “mortgage loan,” within three words of “pooled investment,” “real estate securities,” “collateralized mortgage,” “mortgage insurance,” “sub-prime” and “fraud” within three words of “mortgage.”31

These SAR-SFs reported the following activities:

  • Asset fraud. Filers reported that account statements provided as proof of a borrower’s assets had been fraudulently altered. This fraud was discovered when lenders requested re-verifications of the account statements.

  • Securities accounts containing proceeds from possible mortgage fraud. Filers reported that individuals identified in news media articles as either suspected or convicted of mortgage loan fraud held accounts with the filers. No filers were able to confirm if the accounts were funded with proceeds from the fraudulent activity. Accounts held by these subjects were included in on-going due diligence programs.

  • Life insurance policies possibly funded with proceeds from possible mortgage fraud. Two life insurance companies reported that their clients were identified in news media as being associated with mortgage loan fraud. The filers could not determine if the policies were funded with proceeds derived from mortgage fraud schemes. The news articles were reviewed as part of on-going due diligence programs.

31   The searches did not retrieve SAR-SFs reporting fraud in securitized or pooled mortgages.

Excerpted from Mortgage Loan Fraud: An Industry Assessment based upon Suspicious Activity Report Analysis - April 2008, page 45

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