I know the subject of SARs has come up many times, but as usual, they are all focused on currency transaction related reasons. But here is my question…does anyone out there have any guidance on what a mortgage bank company should be looking for (specific) for filing SARs? When are we required to report SARs on mortgage related activities? Are there things to look out for (certain types of activities etc.) that mortgage banks should look out for and report on SARs? We are having a hard time coming up with a policy and procedures manual which describes the SAR reporting requirements for mortgage activities (all residential). Would anybody be willing to share theirs with us?

Probably, you should be looking for the same elements that a bank would file a SAR on - fraud or misrepresentation. Falsification of deposits, income, employment are reasons to file, as well as appraisal fraud and identity theft.

If a broker or applicant misrepresents the transaction (owner occupancy rather than the true investment property) there is the possability that a SAR can be filed. Although apparently meaningless, the risk for investment is significantly higher than OO property, hence the higher rates and stringent underwriting terms. All or any of those cases could cause an investor to require you repurchase the loan.

Basically, if you are provided with documentation to make a loan that you would not normally make with legitimate documention, IMHO, it would be reportable, even if you do not make the loan.

I agree with SC Banker. We have filed SAR's under those circumstances-if we determine a borrower has provided fraudulent or altered documentation or information. If nothing else, it is a CYA.

One of our compliance consultants said that we should file a SAR anytime a customer provides financial documents, specifically tax returns, that do not support their current debt. Such as a debt ratio of more than 100%. I have seen over 300% just recently. Especially if they actually admit to us that they make more money and don't claim it.

You'd also look for potential laundering here with large cash down payments or larger than possible payments to retire the debt. Cash in, refi, cash out, clean.

IRS info
FinCEN proposal, AML Requirements for Persons Involved in RE Closings and Settlements

The third post down (by Bonnie M) in this thread has some really useful information in it.

I just used the link to accessed the FinCEN proposal and had no problem.

Strange. When I click on the first link (IRS Info), it works, but when I click on the second link (FinCEN proposal . . . ), I get an error message.

Your flux capicitor for PDF files may be in a state of rejection. I'll email you the file. The link is working for me.

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Just curious. Are you still making the loan these cases?

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Oh, absolutely not!!

We are just filing the SARs right after the Notice of Action Taken!

Quick question on SARs and residential mortgage originations: Do the 5,000 and 25,000 criteria basically become a moot point for housing purchases? I know this sounds like a stupid question, but we are writing our SAR policy for mortgage subsidiary and I would hate to reiterate those monetary criteria when it really doesn't make any sense to refer to them and make the policy sound silly by refering to them (by the way, our mortgage bank deals only with originations, the bank deals with the refinances and HELOCs etc.). I know, silly question but just wondering about your thoughts on that. Ok, I know this is also a question that has probably been answered for 'regular' transaction SARs, but again, do we need to file a SAR even if the borrower changes/her mind? If we didn't plan on making the loan even with the falsified information? What if the false information would not have made a difference in the decision to make the loan in the first place? Do we still have to report a SAR? Or do we only report a SAR if the information would have prompted us to make the loan?

The $5,000 limit is triggered by the amount of the loan, not the amount of falsified info.

You ask:
1. ". . . do we need to file a SAR even if the borrower changes/her mind?" Yes.

2. "If we didn't plan on making the loan even with the falsified information?" Yes.

3. "What if the false information would not have made a difference in the decision to make the loan in the first place? Do we still have to report a SAR?"

I once wrote the regulators and asked them for the definition of "false statement". One FDIC attorney replied, in writing, with the following:
"If the omitted information would effect the bankers decision” then it is a false statement."

If you mean that the false info is very small (such as leaving off a $100 credit card balance), then I wouldn't file a SAR. If you mean you were going to deny them anyway, but they left off $100,000 in credit card debt, I believe you should file a SAR.