FBI Targets Loan Fraud

The U.S. government, which is fighting a rising tide of mortgage fraud cases, is pushing for regulations that would require loan brokers to report suspicious activity in the origination process.

At a press briefing at FBI headquarters last week, government officials said suspicious activity reports are only filed by federally insured or regulated financial institutions because loan brokers do not have to comply with the Bank Secrecy Act.

The agency said it is talking to trade groups about the problem of brokers not reporting.

Chris Swecker, assistant director for the FBI's criminal investigative division, said the agency is not necessarily looking for a legislative fix, but would like the brokerage community to pitch in.

FBI officials said some brokers are reluctant to pass on tips regarding possible mortgage fraud because legal counsel advises them not to.

But Mr. Swecker made it clear that brokers "are the first line for us" because these intermediaries are at the beginning of the loan origination process.

He noted that mortgage fraud "is definitely on the rise because of high volume and low rates." To some degree he also blamed the problem on "fly-by-night brokers."

In a new report the agency notes, "A significant portion of the mortgage industry is void of any mandatory fraud reporting. In addition, mortgage fraud in the secondary market is often underreported."

All 56 of the FBI's field offices have open cases of mortgage fraud.

The cases under investigation include allegations of equity skimming, air loans, property flipping, silent seconds, nominee and straw borrowers, inflated appraisals and more.

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