We have a difference of opinion in the office, as to whether or not SARs should be filed. We have 4 loans that funded at the end of 2017, where we have been notified by the Investor that the loans were "early payoffs". In each case, the borrowers took large cash-out & then 2-4 months later, sold the houses. Some feel that they knew they were going to sell & committed misrepresentation. Some feel that because they signed a document saying they would occupy the home for 12 months, that they have committed misrepresentation. If a house was actually "listed for sale" (we didn't know at the time") is that fraud? I'm new to the world of SARs, so I could use some advice.

Some feel that because they signed a document saying they would occupy the home for 12 months, that they have committed misrepresentation.

For four separate houses?

yes....4 different homes....4 different borrowers

Well, that is some kind of a coincidence I would think? I would be doing a lot of digging into this situation to understand why. Is there a relationship somewhere? Also will depend on what sort of loans these might have been and a review the documents to determine if there were false statements made - FHA, FNMA, etc.

I've reviewed each loan. There does not appear to be any connection; properties are in 4 different States. The loans were standard Cash-out Refinances. In 2 of them, the Borrowers were Retired AND the properties had NO mortgage, so each loan was full cash-out minus closing costs. The 3rd loan was also a Retired Borrower with a very small mortgage & was a standard Cash-out Refi. The 4th was an employed Borrower with a mortgage.

The only documents that are in question are (1) a document were the Borrower certifies that the subject property is NOT listed for sale and (2) a document where they certify that they intend to occupy the subject property for 12 months. However, I think this 2nd document goes to "Owner Occupied" vs "Investment", as it relates to the loan pricing. I think the statement is tied to whether or not the borrower is lying about occupancy so he/she can get a better interest rate & higher loan amount. I don't see how this relates to selling the property 2-4 months later.

I don't see how a legitimate sale of a home, even just 2-4 months after getting a loan justifies a SAR.

Shouldn't the appraisal have stated if the property was listed for sale?

None of the reports indicated the property was for sale. Looks like they were listed after the loans closed.

Did you ask the customers about the sales? Maybe they decided to move. Maybe they all have the same financial advisor that told them to do that.

I have not contacted the borrowers. Just starting this process. I agree that there appears to be a legitimate reason for the Sales. But I have others telling me to file the SARs. I just don't see what is "suspicious" about the transactions, that "requires" us to file.

You would only file if after your investigation you felt the transactions were suspicious. As it stands, I am getting the impression you are not feeling that this is suspicious. If you are the BSA Officer and you have the authority to make the decision, document why you are not filing and move on.

could not agree more

is your bank out any money? has the loan you made been paid off? if not, are they behind in any way? was the home listed as collateral for the loan? if there was only one of these instead of 4 would you still think it was suspicious?

HappyG - they were informed by the investor who bought the loans from them that they paid early - so most of those question are moot.

I agree - document and move on. No SAR here based on what you already determined.

Early loan pay-off is a warning sign for money laundering - that is where I get a loan and then I pay it off in a short period of time and you have no idea where I suddenly got the money. In these cases - they sold the house - there is no money laundering and no apparent illegal activity.

Ok, are we sure that they sold the home or just paid it off?

Some of us would have loved to sell a house in only 2 months of listing.

"Well, that is some kind of a coincidence I would think?"

yes all 4 homes were actually sold. Thank you all for your responses.