From Homescape

Following an increase in suspicious activity report (SAR) filings from banks and financial institutions with mortgage loan fraud, the Financial Crimes Enforcement Network (FinCEN) issued a report in November 2006 describing trends and patterns with suspected fraud cases filed between April 1, 1996 and March 31, 2006. FinCEN has continued to monitor these findings, and their latest report shows the number of fraud cases across the country increased 42 percent in 2007 over the year before.

In 2007, financial institutions filed 52,868 SARs, citing suspected mortgage loan fraud, compared to 37,313 in 2006. FinCEN says that one reason for this increase “may be that lenders are increasingly identifying suspected fraud prior to loan approval and reporting the activity ahead of time.” Suspected fraud was detected prior to loan disbursements in 31 percent of the mortgage loan fraud SARs filed between April 1, 2006 and March 31, 2007, compared to 21 percent during the preceding 10 years.

Total SAR filings on suspected mortgage loan fraud showed the greatest increases in these six states:

Illinois: 75.80 percent
California: 71.29 percent
Florida: 53.04 percent
Michigan: 51.50 percent
Arizona: 48.73 percent

Other suspected fraudulent activity included forged or fraudulent documents, 28 percent of cases; occupancy fraud, 14.4 percent; appraisal fraud, 13.1 percent; identity fraud, 10.2 percent; straw buyers, 5.6 percent; identify theft, 3.4 percent; and flipping, 2.7 percent.

While some analysts fear that the number of fraud cases will be camouflaged as lenders begin providing more refinance options to distressed homebuyers with adjustable rate mortgages, I believe more of these cases will be unveiled as banks and other financial institutions take a thorough look at the loans that were initially approved by a different lender. We're just now starting to peel away the layers masking the housing boom, and the truth isn't going to be pretty.

Got hot local housing tips or a story you want to share? Contact Amy Le at openingdoorsblog@homescape.com.