Banks and other financial institutions filed 52,868 suspicious activity reports involving suspected mortgage fraud in 2007, an increase of 42 percent over the year before, financial regulators said in their first report on mortgage fraud since November 2006.
The Financial Crimes Enforcement Network said suspicious activity reports were also up 44 percent in 2006, to 37,313, with the greatest increases in Illinois (75.8 percent), California (71.3 percent), Florida (53 percent), Michigan (51.5 percent), and Arizona (48.7 percent)
One reason for the increase, FinCen said, may be that lenders are identifying more cases of suspected fraud prior to loan approval.
Suspected fraud was detected prior to loan disbursements in 31 percent of the mortgage loan fraud SARs filed between April 1, 2006, and March 31, 2007, FinCen reported, compared with 21 percent during the preceding 10 years.
Mortgage brokers initiated the loans reported on 58 percent of a sample of 1,769 suspicious activity reports analyzed in detail. That review showed financial institutions suspected misrepresentation of income, assets or debts in 43 percent of suspected fraud cases.
Other suspected fraudulent activity included forged or fraudulent documents (28 percent of cases), occupancy fraud (14.4 percent), appraisal fraud (13.1 percent), identity fraud (10.2 percent), straw buyers (5.6 percent), identify theft (3.4 percent) and flipping (2.7 percent).
In its own analysis of data from the FBI and FinCen last month, the Mortgage Asset Research Institute concluded that it may be three to five years before much of the fraud and misrepresentation in loans made in 2007 is uncovered. Many adjustable-rate mortgage loans will be refinanced, "potentially blocking discovery of some of these issues," the report concluded (see Inman News story).
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