Regulator Guidance Highlights New Reverse Mortgage Fraud Trends

Screen shot 2010-04-27 at 4.57.03 PM.jpg Financial institutions are being asked to include any reverse mortgage fraud occurrences in their Suspicious Activity Reports (SARs) according to new guidance issued by the Financial Crimes Enforcement Network (FinCEN).

As more seniors have started using reverse mortgages, public reports of financial crimes involving the HECM program have become more prevalent said FinCEN.

“The most troubling aspect of HECM fraud is that it takes advantage of senior citizens who have worked hard over their entire lives to own their homes,” said FinCEN Director James H. Freis, Jr. “To combat these frauds head-on, FinCEN is working closely with HUD’s Inspector General (U.S. Department of Housing and Urban Development’s Office of Inspector General) and the Secret Service (Department of Homeland Security) to proactively identify hot-spots of suspected HECM and other mortgage fraud activity and directly provide to law enforcement a more defined battleground to direct their resources.”

Law enforcement and HUD officials have identified new trends and schemes involving thefts from seniors by family members, loan officers, and others as well as the use of unsuspecting seniors in property flipping and other HECM-related fraud schemes.

The advisory includes examples of common fraud schemes and potential “red flags” for fraudulent activity which include cross selling, cash out theft, property flipping, fake down payments, and distressed non-senior mortgages.

In order to assist law enforcement in combating reverse mortgage fraud, the advisory suggests institutions use specific key words in the SARs report regarding fraud related to the HECM program.

“Using this additional information, the vigilance of financial institutions together with law enforcement efforts against illicit mortgage-related activities will make an important contribution to the economic recovery of the housing market,” said FinCEN.

Advisory to Financial Institutions on Filing Suspicious Activity Reports Regarding Home Equity Conversion Mortgage Fraud Schemes

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