Mortgage Fraud Activity Sees 31% Spike, Lenders Reporting Earlier

Mortgage fraud is on the rise, up 31% in 2011 despite a decline in fraud during the fourth quarter, largely attributable to repurchase demands. The good news: financial institutions are working harder to combat it, says the Financial Crimes Enforcement Network, in an annual report released this week.

The number of fraud instances rose in 2011 to 92,028 suspicious activity reports (SARs), up from 70,472 submitted in 2012.

However, there is “significant improvement” in mortgage lending due diligence since the height of the housing bubble, FinCEN says, noting that lenders are increasingly reporting suspicious activity early in the process, allowing for heightened fraud enforcement.

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“The FinCEN report shows we’re seeing financial institutions spotting activity that appears to be fraud before it happens and in the process, helping to prevent it,” said FinCEN Director James Freis, Jr. “Even though we’re seeing the market work through its backlog of the book of business now in default, FinCEN data is revealing possible fraud that institutions are using to help defeat scammers.”

Specifically in debt elimination SARs, FinCEN notes, filers of the suspicious activity recognized that documents submitted to cancel mortgage obligations or pay off loan balances were invalid and communicated to customers that their mortgages were still due.

View the report.

Written by Elizabeth Ecker