The Financial Crimes Enforcement Network said there has been an 88% year-over-year increase in mortgage loan fraud suspicious activity reports filed in the second quarter.
Financial institutions filed 29,558 MLS SARs in the second quarter this year, almost 14,000 more than the same quarter in 2010. According to FinCEN, this drastic spike in MLS SAR numbers is directly attributable to mortgage repurchase demands and special filings generated by several institutions.
FinCEN said the majority of the MLF SARs examined last quarter involved mortgages that closed during the highest time of the real estate bubble. According to FinCEN, 87% of the MLF SARs filed during the second quarter contained suspicious activity that took place before 2008. Meanwhile, 63% involved dubious activities that occurred four or more years ago.
“We're continuing to see a large number of SARs filed on activity that occurred more than two years ago, an indication that financial institutions are uncovering fraud as they sift through defaulted mortgages,” said James Freis, Jr., director of FinCEN. “But we also continue to see indications of ongoing mortgage fraud activities. FinCEN's report raises awareness of the common scams that homeowners and lenders may encounter when arranging or modifying home financing.”
FinCEN looked at a sample of 1,825 MLF SARs that reported suspicious activity within 90 days of filing the report, and found that the most common type of fraud involved misrepresenting income, occupancy, debts and assets. In the second quarter, 30% of the samples accounted for this type of activity.
Debt elimination scams continued to be common, appearing in 19% of the sampled reports. Scams involving the fraudulent use of social security numbers made up 11% of the reports, followed by short sale fraud at 6%, identity theft at 5% and appraisal fraud at 4%.
In both 2011 and 2010, more than 80% of the MLF SARs filed involved suspicious activity amounts under $500,000.
California and Florida were the highest ranked states based on the number of mortgage loan fraud subjects, followed by New York and Illinois. Among the 50 most populous metropolitan areas, Los Angeles had the most MLS SAR subjects in 2Q 2011, with New York, Chicago, Miami and Riverside, Calif., rounding out the top five.
