The number of suspicious activity reports (SARs) from financial institutions related to foreclosure scams dramatically increased last year, according to a new report from the Financial Crimes Enforcement Network
The report also noted that the type of foreclosure scams also evolved during the reporting period, which covered Jan. 1, 2004, through Dec. 31, 2009. FinCEN said foreclosure rescue scams increased substantially in the last eight months of 2009.
Just 28 suspicious activity reports generated by financial institutions related to loan modification and foreclosure scams in 2004. In comparison, more than 3,000 such reports of suspected foreclosure scams were filed in 2009 . The period reviewed by FinCEN encompassed the run-up in housing markets, the subsequent economic downturn, and the more recent government efforts to stabilize the housing market.
“The increase in reporting of suspected foreclosure rescue scam activity could mean that there is an increase in fraudulent activity, but it also reflects an increase in awareness among financial institutions of the fraud perpetrated,” said FinCEN Director James Freis Jr.
In addition to the increase in reported activity, the analysis shows that the nature of foreclosure rescue scams had shifted. Early SARs identified subjects purporting to be loan modification or foreclosure rescue specialists. These subjects targeted financially troubled homeowners with promises of help.
The scams involved the homeowners signing quit-claim deeds, and resulted in loss of equity in or title to their property. The scammers used straw borrowers, who misrepresented income, employment, or occupancy, or provided other fraudulent information to deceive a new lender into making a new mortgage loan.
The scams described in later SARs reflect an evolution into advance fee schemes, in which purported loan modification or foreclosure rescue specialists promised to arrange modification of a homeowner’s mortgage for more favorable repayment terms. Following receipt of large advance fees, scammers rarely, if ever, provided any service. A variation of the advance fee scam involved phony debt elimination programs in which the homeowners paid advance fees and were instructed to contact their lenders with specious assertions that the original mortgage debt was illegal.
The chart shows the top 10 metropolitan regions, ranked by the concentration of local subjects of all mortgage loan fraud SARs reported between Jan. 1, 2009, and June 10.
|Miami-Fort Lauderdale-Pompano Beach, FL
|Los Angeles-Long Beach-Santa Ana, CA
|New York-Northern New Jersey-Long Island, NY-NJ-PA
|Riverside-San Bernardino-Ontario, CA
|Atlanta-Sandy Springs-Marietta, GA
|San Francisco-Oakland-Fremont, CA
FinCEN, part of the Department of the Treasury, administers the Bank Secrecy Act. Its analysts research and analyze reports submitted under the Act. In addition, in the fall of 2009, FinCEN became a participant in the Obama Administration’s Financial Fraud Enforcement Task Force, which recently announced several major crackdowns on mortgage fraud
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