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Mortgage fraud reports rose 31 percent in first quarter of 2011

[Jun 29, 2011.]


Reports of mortgage fraud jumped 31 percent to 25,485 in the first quarter of 2011, compared with 19,420 in the year-earlier period, according to the Financial Crimes Enforcement Network (FinCEN). The increase in suspicious activity reports (SARs) is related to big mortgage lenders doing additional reviews of mortgages after receiving demands to purchase poorly performing loans.

FinCEN Director James H. Freis, Jr. said in a statement:

A substantial majority of reports involved activities that occurred in 2006-2007, an indication that the industry is slowly making its way through the most problematic mortgages. FinCEN will continue to closely track SAR data related to mortgage fraud and work closely with the U.S Trustee's Office, Federal Deposit Insurance Corporation, Federal Trade Commission, and National Association of Attorneys General to investigate and prosecute those perpetrating debt elimination scams and to protect consumers and financial institutions from scammers.

Mortgage fraud schemes

Many of the attempts at fraud involved customers and third parties submitting fake documents and payment methods that were aimed at having mortgage obligations eliminated. Other types of fraud involved loan modification and foreclosure rescue scams and falsified claims of identity theft. Some people misrepresented their income by falsifying tax returns, pay stubs and W-2 forms.

Another scam involves flopping, which is selling a foreclosed property at an artificially low price to a straw buyer, who turns around and sells the property for more money and keeps the profit. In some cases this type of transaction was categorized as short sale fraud.

Reports of older scams

The analysis also found more reported incidents of mortgage fraud that occurred over two years before the SAR was filed. For the first quarter of 2011, 86 percent of reported activities occurred more than two years before the filing. Furthermore, 42 percent of the reports occurred at least four years before the SAR filing.

California had the highest number of mortgage fraud reports, followed by Nevada, North Carolina and Washington, D.C. In terms of the 50 most populous metropolitan areas, Los Angeles had the most fraud reports, followed by New York, Chicago and Miami.

Know the signs of mortgage fraud

It is important for borrowers to be on guard for potential mortgage fraud. Any time a deal sounds too good to be true, it probably is. Consumers should also be wary of people who approach them unsolicited with some type of mortgage rescue scheme.


About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.

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