The Financial Crimes Enforcement Network (FinCen) issued an advisory aimed at helping residential mortgage loan originators (RMLO) and non-bank mortgage lenders identify suspicious activity related to potential mortgage fraud and submit suspicious activity reports (SAR.)  The advisory outlines the most common types of mortgage fraud schemes and the potential "red flags" for which lenders should look.

The advisory was announced by FinCEN Director James H. Freis, Jr. today at the American Association of Residential Mortgage Regulators' (AARMR's) annual conference.  He also discussed FinCEN's new anti-money laundering (AML) requirements for RMLOs which, along with a rule requiring the filing of SARs went into effect last Monday.

The advisory defines nine types of mortgage fraud including income, occupancy, appraisal, liability, and employment fraud.  It also warns lenders about debt elimination schemes, foreclosure rescue scams, identity theft and schemes involving Home Equity Conversion or reverse mortgages.  The advisory also lists several dozen tips regarding behavior, documents, or other indications of possible suspicious activity such a young buyer purchasing in a senior development, identical documents submitted from the same source for multiple loan applications, or addresses that indicate the borrower does not reside in the mortgage property.

If an institution suspects that someone is attempted to conduct a transaction that may be fraudulent in nature or, under the new money laundering regulations, if a financial institution knows or has reason to believe that a transaction made or attempted through its offices involves funds or are an attempt to disguise funds derived from illegal activity or lacks a business or apparent lawful purpose then the institution may be required to file a SAR.  The advisory provides detailed information on filing these documents and the information which is required to be included.

FinCEN has been working to provide information to both regulators and RMLOs about the new regulations.  Among its initiatives is a web page with links to a variety of publications to assist them with compliance and a Webinar for RMLOs.  The agency is also working with its regulatory partners to develop an examination manual, which will ensure consistent compliance examination procedures and is conducting public outreach at numerous industry events to assist RMLOs with understanding their compliance obligations.

Freis said FinCEN is "looking forward to working with the mortgage company and mortgage broker community, as well as our regulatory and law enforcement partners, to protect this sector of the financial system from illicit actors, and these financial institutions and their customers from fraud and financial loss.  This step closes a regulatory gap and will augment the information available to law enforcement about suspicious activity in this sector."