The Financial Crimes Enforcement Network (FinCEN) has released a new analysis of suspicious activity related to possible mortgage loan fraud reported in the third quarter of 2009. The report also discusses the types of suspected fraud occurring in the foreclosure rescue area as a result of FinCEN issuing a ‘red flags’ guidance on foreclosure rescue scams in April 2009.
The analysis found that in suspicious activity reports (SARs) indicating suspicious activity by loan modification or foreclosure specialists, filers most commonly reported two types of schemes.
First, subjects conned homeowners into signing quit-claim deeds to their properties and then sold homes from under the former owners to straw borrowers; the homeowners subsequently received eviction notices. Second, others falsely claimed affiliations with lenders to convince distressed homeowners to pay large advance fees for modification services, but failed to take any action on the homeowners' behalf.
Overall, the report shows that in the third quarter of 2009, depository institution filers submitted 15,697 mortgage loan fraud (MLF) SARs – a 7.5% increase over the same period in 2008.
‘FinCEN's tracking of suspected mortgage loan fraud and foreclosure rescue scam SARs has contributed greatly to law enforcement's ability to better understand the nature of this insidious crime,’ says FinCEN Director James H. Freis Jr. ‘FinCEN's efforts in fighting mortgage fraud and foreclosure rescue scams remain a priority. We are harnessing all of our authorities to support this fight.’
In April 2009, FinCEN issued guidance to financial institutions on filing SARs regarding loan modification/foreclosure rescue scams that asked SAR filers to use the words ‘foreclosure rescue scam’ to help law enforcement identify suspected fraud. This also looks at SARs identified by filers with the phrase ‘foreclosure rescue scam’ filed in the third quarter of 2009.
Other highlights in the report include the following:
- Filers of SARs in the study population commonly reported foreclosure and loan modification fraud that included occupancy misrepresentation, Social Security number discrepancies, and altered or forged documentation.
- By state, California and Florida represented a combined 42% of reported SAR subjects in the study population. The top 10 metropolitan areas by population included 40% of all SAR subjects in the study population.
- Thirty-five percent of the SARs examined in the report indicated an amount of $100,000 to $250,000, and an additional 32% of these SARs filed involved suspected amounts of $250,000 up to $500,000. Five percent of these SARs were for suspected amounts of $1 million or more.
The report also shows that although subjects of MLF SARs filed in the third quarter of 2009 by depository institutions primarily have been borrowers, filers also reported industry insiders as subjects, including loan officers, underwriters and purported loan modification agents.
SARs involving loan modifications described potential fraud in either the application for the loan modification or in the older loan that came under review subsequent to the modification application.
An increasing number of filers submitted SARs noting suspicious activity in connection with actual or purported foreclosure rescue specialists, FinCEN adds. Credit card processors noted multiple transaction charge-backs in accounts held by clients later determined to be loan modification or foreclosure rescue specialists, after homeowners complained that the specialist failed to deliver services.