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Reports of possible mortgage fraud grew in the second quarter, with financial institutions filing 29,558 mortgage loan fraud suspicious activity reports, the Financial Crimes Enforcement Network said Wednesday. That is up from 15,727 in the same quarter of 2010. In the first quarter of 2011, suspicious mortgage activity reports grew to 25,485 complaints. The surge in SARs are coming as mortgage lenders sift through the paperwork in past mortgages. Mortgage servicers remain under heavy scrutiny following robo-signing allegations and continue to sift through documents in order to make sure all ducks are in a row. Many of the reported instances come from defaults, including borrowers who wrongly presented information about their finances. The FinCEN network, which works in tandem with the Treasury, said the surge in activity is also tied to increasing mortgage repurchase demands and other special filings. SARs are especially surging on transactions that involve several financial institutions. FinCen found that 81% of the suspicious activity was related to circumstances that occurred before 2008. Sixty-three percent involved activities that occurred four or more years ago. "We’re continuing to see a large number of SARs filed on activity that occurred more than two years ago, an indication that financial institutions are uncovering fraud as they sift through defaulted mortgages," said FinCEN Director James Freis, Jr. "But we also continue to see indications of ongoing mortgage fraud activities," he added. "FinCEN’s report released today raises awareness of the common scams that homeowners and lenders may encounter when arranging or modifying home financing." Write to Kerri Panchuk.

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