FinCEN Issues Report on Mortgage Fraud

The Financial Crimes Enforcement Network has released a report on the increased instances of mortgage fraud reported by banks and the financial industry.

"Mortgage Loan Fraud: An Update of Trends Based Upon an Analysis of Suspicious Activity Reports," was released April 3 and updates a previous mortgage loan fraud study issued in November 2006.

Both reports are based on FinCEN's analysis of suspicious-activity reports that banks and financial institutions file with the government.

Federal banking law requires financial institutions and money services businesses to have anti-money-laundering strategies in place and to report suspicious transactions to FinCEN.

The law's reporting and record-keeping requirements create a paper trail so officials can investigate financial crimes and trace the movement of funds.

FinCEN says the November 2006 study examined suspicious-activity reports filed between April 1996 and March 2006, while the updated study analyzes SARs filed between April 2006 and March 2007.

The agency says financial institutions filed more than 37,000 SARs on mortgage fraud in 2006 and that the number increased to nearly 53,000 in 2007.

FinCEN also says the more recent SARs reveal a 50 percent increase in the number of reported instances of fraud where schemes were uncovered before mortgages were funded.

These filings show that the financial industry's awareness of mortgage fraud and efforts to prevent it are increasing, the agency says.

"FinCEN's analysis indicates that the financial community is becoming increasingly adept at spotting and reporting suspicious activities that may indicate mortgage fraud," Director James H. Freis Jr. said in a statement.

In addition the new report says many trends in mortgage fraud, such as misrepresentations of income by borrowers, have continued and that certain types of fraud schemes have increased significantly.

Financial institutions' reports of identity theft in conjunction with mortgage fraud have increased 96 percent since the previous 2006 study, FinCEN says.

The agency adds that fraud involving mortgages is the third most common type of financial fraud reported by banks and financial institutions, after money laundering and check fraud.

The new report is available at

To comment, ask questions or contribute articles, contact West.Andrews.Editor@Thomson.com.