Alert August 27, 2013

FinCEN Issues Analysis of Mortgage Loan Fraud Suspicious Activity Report Filings; Notes Drop Over Previous Calendar Year

On August 20, 2013, the Financial Crimes Enforcement Network (“FinCEN”) issued a report (the “Report”) on mortgage loan fraud suspicious activity report (“MLF SAR”) filings in calendar year 2012 (“CY 2012”), noting a 25% decrease in such filings over the previous year (from 92,561 to 69,277).  While MLF SAR filings were down, the total number of Suspicious Activity Reports by Depository Institutions increased by 9%, to 867,990, and FinCEN received 102,913 reports on the FinCEN SAR.  The Report noted that MLF SAR filings had grown every year between 2001 and 2011 and speculated that the CY 2012 decline was the result of an unusual spike in MLF SAR filings during calendar year 2011 (prompted by mortgage repurchase demands on banks that yielded reviews of mortgage loan origination and refinancing documents).  The Report analyzes time lapses between the filing of MLF SARs and the suspicious activities themselves, noting that mortgage loan fraud typically occurs at the origination of the loan, but is sometimes not discovered and reported until several years later (in CY 2012, 57% of reported MLF activities commenced more than 5 years prior to the filing).  The Report also review the suspicious activity amounts and loss amounts reported on the MLF SARs, assesses MLF SAR reporting by state and provides updated statistics on foreclosure rescue-related SARs filed during CY 2012, noting that filings indicating “foreclosure rescue” were up despite the overall drop in MLF SAR filings.  FinCEN anticipates continued law enforcement interest in types of mortgage fraud, and noted that the new FinCEN SAR enables the filer to more clearly identify various types of mortgage-related fraud.