FBI calls for mandated broker fraud reporting mortgagepress.commortgage fraud, detection, prevention
With the incidences of mortgage fraud on the rise, the federal
government is pushing for regulations that would require loan
originators to report suspicious activity in the origination
process. At a recent press briefing in Washington, D.C., the FBI
pointed out that suspicious activity reports (SARS) are only filed
by federally insured or regulated financial institutions; loan
brokers do not have to comply with the Bank Secrecy Act.
The FBI currently has 642 open cases of mortgage fraud, as
compared to 436 cases in 2003, and there were 241 indictments or
guilty pleas in 2004 as compared to the year before. The number of
SARs that the FBI has received increased 147 percent in 2004 to
17,127 instances of suspected fraud. According to the FBI, a
significant portion of the mortgage industry is void of any
mandatory fraud reporting. In addition, mortgage fraud in the
secondary market is often under-reported, thus the true level of
mortgage fraud is largely unknown.
The FBI has joined with the mortgage industry to identify fraud
trends and educate the public (See "NAMB Teams With FBI on Mortgage
Fraud," April 2005 issues of The Mortgage Press). Some of
the current trends in mortgage fraud include:
"Equity skimming
Common equity skimming schemes involve the use of
corporate shell companies, corporate identity theft and the use of
or threat of bankruptcy/foreclosure to dupe homeowners and
investors.
"Mortgage-related identity theft
A thief could use a stolen identity to defraud a
lender.
"Property flipping
Property flipping is best described as purchasing
properties and artificially inflating their value through false
appraisals. Associates of the "flipper" then repurchase the
properties several times for a higher price. After three or four
sham sales, the victimized lenders foreclose on the properties.
Often, flipped properties are ultimately repurchased for 50-100
percent of their original value.
An analysis of mortgage industry fraud surveys identified 26
different states as having significant mortgage fraud problems.
Rounding out the FBIs top 10 "hot spots" of incidents per capita
were: California, Colorado, Florida, Georgia, Illinois, Michigan,
Missouri, Nevada, South Carolina and Utah.
The FBI has been collaborating with the mortgage industry and
Financial Crimes Enforcement Network to create a more productive
reporting requirement for mortgage fraud. The FBI has also been
working with the mortgage industry through the Mortgage Bankers
Association to promote a more efficient and effective method of
identifying and reporting fraudulent mortgage activity, otherwise
known as the Suspicious Mortgage Activity Report (SMARt Form)
concept.
For more information, visit www.fbi.gov.
