FinCEN Sees Spike in Possible Foreclosure and Mortgage Modification Scams
Nearly a year after issuing a red flag advisory to servicers in April 2009 to beware of foreclosure scams, the Financial Crimes Enforcement Network (FinCEN), an overseeer of financial activities for the US Treasury, says it received hundreds of suspicious activity reports (SARs) regarding the fraud. In data released today, FinCEN also gave information on the more popular forms of mortgage modification fraud. In the third quarter of 2009, depository institution filers submitted 15,697 mortgage loan fraud SARs, a 7.5% increase over the same period in 2008. The primary suspicious activity surrounding loan modifications deal with occupancy misrepresentation, social security number discrepancies, and altered or forged documentation, the government agency said. "Subjects of these reports primarily have been borrowers, though filers also reported industry insiders as subjects, including loan officers, underwriters, and purported loan modification agents," said a FinCEN statement today updating progress made since April's red flag advisory. "SARs involving loan modifications described potential fraud in either the application for the loan modification, or in the older loan which came under review subsequent to the modification application." The two most common form of borrower scams involve conning homeowners into signing quit-claim deeds to their properties. Scammers would then sell homes from under the former owners to straw borrowers and the homeowners subsequently received eviction notices. In other instances, scammers falsely claim affiliations with lenders to convince distressed home-owners to pay large advance fees for modification services, but then do nothing to keep the borrowers in their homes. California and Florida originated the most overal mortgage loan SARs, at 6,444 and 5,077 respectively. New york is a distant third at 1,614. Write to Jacob Gaffney.