For the first time since 1996 the number of suspicious activity reports filed by depository institutions that identified possible mortgage loan fraud experienced a year-over-year decline.
According to the Financial Crimes Enforcement Network, there was a 29% drop in SARs that recognized the likelihood of mortgage loan fraud in 2012. A total of 65,819 reports were filed for the calendar year identifying this category.
Over the past three years, mortgage loan fraud accounted for nearly 46% of all noted instances of this specific activity for the last decade, FinCEN said.
Furthermore, only two of the seven fraud types saw a drop in reported activity during the calendar year, with both mortgage loan fraud and commercial loan fraud seeing a double-digit decrease of 29% and 19%, respectively.
Additionally, eight of the 12 defined relationship to financial institution types in the SARs had decreases during the calendar year. The most notable drops were seen in the following categories: appraiser (down 44%), director (27%), broker (27%) and shareholder (22%).
Also, filers associated employees as subjects with all five most frequently reported activity categories. This means employees who engaged in mortgage loan fraud submitted misrepresentations of borrowers’ income, employment, credit, or occupancy or possibly influenced appraisers to increase values. The employees might have been associated with improper submission of gift letters as well as falsifying equity and other information to the loan committee.
FinCEN said loan officers were often identified as employees in these activities.
Meanwhile, broker relationships comprised 4% of the total dataset. All SARs reviewed in this category involved real estate or mortgage loan brokers who had some sort of affiliation with fraudulent activity, either by submitting inaccurate statements, misrepresentation of occupancy or employment, or other tactics that would help a borrower obtain a mortgage they were not qualified for.
Lastly, officer relationships comprised 3% of the volume. Loan officers were most frequently cited for this category and typically engaged in various commercial or mortgage loan fraud activities like handing in altered documentation or violating their lending limit.
Other officer relationships identified in these SARs included vice presidents, branch and department managers, and chief information officers.
Overall, FinCEN said the volume of SAR filings in 2012 increased 8%
For 2012, California had the most suspicious activity reports with 149,720. Rounding out the top five was New York with 81,776, Texas with 71,329, Florida with 54,620 and Delaware with 46,551.
