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Mortgage fraud reports grew 31% in quarter one as lenders probed deeper into their pools of distressed assets looking for signs of fraud and theft. The Financial Crimes Enforcement Network, which is part of the Treasury Department, released its first-quarter Mortgage Loan Fraud report Tuesday, which shows suspicious mortgage activity reports growing to 25,485 complaints in first quarter, up from 19,420 last year. FinCen said most of the reports relate to activities that occurred in the 2006-2007 time frame. The network believes the four-year lapse between the activity's occurrence and the report shows how long it has taken lenders to get through mortgage portfolios. Of the potential fraud reports that arrived in quarter one, FinCEN received a number of reports about the production of fake documents and faulty payment methods that customers and third-parties submitted to financial institutions in attempts to end mortgage obligations. About 70 suspicious activity reports filed within 90 days of the fraudulent occurrence related to activities associated with loan modifications, foreclosure rescue scams, identity theft and flopping. Flopping is an activity that occurs when a property is sold to a straw borrower at a low price. The straw buyer then sells the property at a higher amount, pocketing the difference. Write to: Kerri Panchuk.

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