Suspicious Activity Reports (SARs) related
to suspected mortgage loan fraud (MLF) filed by depository institutions decreased
sharply in the first quarter of 2012 compared to the first quarter of 2011 even
as SARs increased overall. Data on these
MLF SARs filings was released Tuesday by the Treasury Department's Financial
Crimes Enforcement Network (FinCEN).
There were 17,651 MLF SARs filed during
the quarter compared to 25,484 one year earlier, a decrease of 31 percent. At the same time there were 205,301 SARs of
all types, an increase of 10 percent from 186,331 in the first quarter of
2011. MLFs represented 14 percent of all
SAR filings in that earlier period compared to 9 percent in the January-March
FinCEN said there was an unusual spike
in MLF SARs filings during the first three quarters of 2011. These arose primarily out of mortgage
repurchase demands on banks which prompted a review of loan origination
documents and subsequent detection of suspected fraud. Filings in early 2012 show that problems
continue to emerge from loans originated in the pre-2009 period which accounted
for the majority of delinquencies and foreclosures experienced since 2008.
Of the MLF SARs filed in the first
quarter, 28 percent related to loans that were four to five years old and 44
percent to loans that were more than five years from their origination data. One year ago 79 percent were three or more
While only a minority of filers included
loss totals and fewer did so in 2012 than in 2011, more than 80 percent of the
losses reported were for amounts under $500,000. Very few filings (51 in 2012) reported any recovery
Numbers of SAR were logically the
largest in the largest states - California, Florida, New York, and
Illinois. On a per capita basis California
was in first place as it was during all of 2011. Nevada ranked second, rising from fifth place
in 2011 and Florida was third. Los
Angeles had the highest number of MLF SARs of any of the large metropolitan
areas both by volume and on a per capita basis.
Two other California MSAs, the Riverside area and San Jose-Sunnyvale
were second and third on a per capital basis followed by Las Vegas and Miami.
To determine the latest trends in
suspected mortgage fraud FinCEN examined a subset of MLF SARs filings reporting
activities that were less than two years old. Nineteen percent of 3,354 MLF SARs filed during
the first quarter met this criterion and FinCEN examined a sample of 334 or ten
percent. The largest category of
suspected fraud was defined as income followed by occupancy, employment, and
debt elimination. Compared to the Q1
2011 report, debt elimination fraud increased as did foreclosure rescue scams
while appraisal fraud was down.
FinCen reported an increasing number of
SARs that appeared to involve "repeat subjects." For example, several foreclosure rescue scam
reports noted that numerous borrowers had complained about the subject
organizations. The same was true of some
SARs related to proposed debt relief services.
Filers also noted several short sale SARs subjects who had been involved
in numerous fraudulent transactions.
This information could provide useful information to law enforcement.
FinCen also identified fraud patterns not
noted in other reports. One was homeowners
insurance fraud where borrowers pocketed insurance payments after home fires
and another, "Keys for Cash" where persons moved into bank owned properties
claiming to have long term leases. Their
true objective appeared to be inducing lenders into paying them to vacate the
In a related matter, the Department of
Justice and the offices of the Inspector General for both the Department of Housing
and Urban Development and the Federal Housing Finance Agency held mortgage
fraud summits in two cities on Tuesday to help protect homeowners in areas
hardest hit by mortgage scams. A third
summit slated for Tallahassee, Florida is being rescheduled because of severe
weather in the area. The summits were
organized by President Obama's Financial Fraud Enforcement Task Force's (FFETF)
Mortgage Fraud Working Group of which FinCEN is a member.
"Preventing, detecting and
prosecuting mortgage fraud is a top priority of the Financial Fraud Enforcement
Task Force and its Mortgage Fraud Working Group members," said FFETF Executive
Director Michael Bresnick. "It's more important than ever that we arm
homeowners with the information they need to recognize the predators up front
and empower them to avoid falling victim to these devastating scams. That's why
the task force is holding these summits in states hit hardest by the