A substantial difference was evident as to how many suspicious activity reports were deemed to contain mortgage loan fraud in the first quarter this year compared to a year ago, according to the Financial Crimes Enforcement Network.
Out of 205,301 suspicious activity reports that were submitted in the first three months of this year, more than 17,600 characterized mortgage loan fraud as to the reason for submitting the file.
Meanwhile, January through March of 2011 saw 25,485 MLF SAR filings, which represents a 31% year-over-year change.
As a proportion of all SARs filed in the first three months of 2012, 9% involved some type of fraudulent activity related to the mortgage industry. Last year, 14% of the 186,331 reports involved possible fraudulent mortgage activity.
However, FinCEN said an increase or decrease in SAR filings is not necessarily indicative of whether there is more or less mortgage loan fraud activities taking place nationwide.
For example, there was an upward spike in MLF SAR counts during the first quarter through the third quarter of last year primarily due to mortgage repurchase demands and special filings generated by several financial institutions, FinCEN said. Those repurchase demands prompted review of mortgage loan origination and refinancing documents, where filers discovered fraud, which was then reported on SARs.
Through the first quarter of 2012, 82% of reported activities occurred more than two years prior to filing, and 72% occurred more than four years before filing. This compares to 85% and 42%, respectively, to last year’s first quarter report.
Furthermore, during 2012 Q1, 44% of all filings also described activities starting five or more years before filing, compared to only 17% the previous year.
“This increase in very dated SARs could indicate that filers are still working through the backlog of bad loans originated in the 2006-2007 housing bubble,” FinCEN said in its report.
During both 2012 and 2011 Q1, more than 80% of MLF SARs involved suspicious activity amounts under $500,000.
Income fraud was the most categorized mortgage narrative on SARs that were filed in the first quarter with 21%. A second notable area that saw an increase in SAR narratives the first three months of 2012 compared to the end of 2011 was debt elimination, with 14% in Q1 2012 compared to 9% through December 2011. Foreclosure rescue scams were cited in 8% of SARs in the first quarter, while only 2% of the filings at the end of last year were reported under this category.
Based on per capita rankings, California remained the top ranked state similar to the last quarter with the most suspicious activity report subjects. Nevada currently is ranked second, jumping three spots from fifth place in the previous quarter. Rounding out the top five states was Florida, Arizona and New York.
In the first quarter, Los Angeles ranked highest among the 50 most populous metropolitan areas, based on volume of reported mortgage fraud subjects, followed by New York, Chicago, Riverside and Miami.
