The Federal Financial Institutions Examination Council (FFIEC) released an updated edition of its white paper on mortgage fraud detection and deterrence.

The Detection and Deterrence of Mortgage Fraud Against Financial Institutions: 2009 Mortgage Fraud White Paper is meant to help examiners understand, identify, and detect mortgage fraud schemes and elements.

New to the white paper is the addition of reverse mortgage fraud, which due to the rapid growth and changes to the market has created a lucrative environment for fraudulent activities says the FFIEC.

According to the FFIEC, the lump-sum cash-out option will yield the greatest amount of loan proceeds and is where most fraud occurs.

In addition, the FFIEC writes that due to the structure of the HECMs, there are no warnings, such as past-due status or default, to raise suspicions, and possibly limit losses, as repayment is only required upon the borrower moving out of the property; upon death; default of property taxes or hazard insurance; or the property is in unreasonable disrepair.