Mortgage Fraud Detection Improving, Treasury Unit Says

The Financial Crimes Enforcement Network, otherwise known as FinCEN, said Friday that an analysis of suspicious activity reports — SARs to most of us in the industry — found that reporting financial institutions were becoming more adept at identifying fraud.

The study looked at SAR filings from March 2007 to 2007, and compared the data with ten previous years of SAR reporting. Institutions posted a 50 percent increase in the number of SARs that reported intercepting the suspected fraud prior to funding a mortgage, FinCEN said.

“FinCEN’s analysis indicates that the financial community is becoming increasingly adept at spotting and reporting suspicious activities that may indicate mortgage fraud,” said FinCEN Director James H. Freis, Jr.

“Fraud is a growing concern for all mortgage lenders, one which hurts everyone involved in the mortgage process, lenders and consumers alike,” said Kieran P. Quinn, CMB, Chairman of the Mortgage Bankers Association. “This report is the authoritative source for data on fraud perpetrated against mortgage lenders, and one which our members rely heavily on to spot trends and stay one step ahead of the fraudsters.”

FinCEN noted a 44 percent increase in SARs reporting mortgage fraud in 2006, and said that the number of mortgage fraud SARs filed in 2007 increased 42 percent, to 52,868 — making mortgage fraud the third most-common suspicious activity reported to the government network, it said.

“[This study] is an excellent example of the value of suspicious activity reporting,” said Sharon Ormsby, Section Chief of the Financial Crimes Section, Criminal Investigation Division of the FBI. “These types of SAR-based assessments are not only of benefit to law enforcement in assessing crime problems and trends, they also provide valuable feedback to the financial institutions who report the information.”