Federally regulated banks filed 62,084 reports of suspected mortgage fraud through mid-summer 2008 — a 44 percent increase from the previous year and nearly 10 times the 6,401 reports filed just five years ago.

Because mortgage fraud can take months or years to detect, the trend doesn’t necessarily reflect the prevalence of fraud in newly originated loans, the Financial Crimes Enforcement Network (FinCEN) said in releasing a report analyzing fraud trends through June 2008.

In about 34 percent of the reports, the filing institutions said they detected the attempted mortgage fraud before funding the loans — that compares with 21 percent of the time over the past decade.

These results suggest lenders "have become increasingly vigilant in trying to protect themselves from and report suspected fraud," FinCEN said.

Mortgage fraud is often uncovered during housing downturns because falling home prices can expose house-flipping schemes that relied on inflated home valuations and falsified borrower information.

It’s often other stakeholders — such as investors who purchase mortgage-backed securities, or mortgage insurers — who uncover mortgage fraud when loans go bad.

Homes were already in foreclosure in 13 percent of the suspicious activity reports filed, FinCEN said, and about 8 percent of reports mentioned repurchase or buy back demands by investors. The same percentage of reports mentioned issues with insurers, such as denials of insurance claims.

In cases where investors may have been exercising their right to force lenders to buy back loans involving fraud or misrepresentations at origination, lenders didn’t file suspicious activity reports until long after the suspected fraud occurred — 19 months, on average, compared with 12 months for other reports. The same lag was noted in reports that referenced issues with insurers.

Show Comments Hide Comments
Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription
×