Reports of suspected mortgage fraud tumbled by a quarter last year thanks to fewer repurchases. The dollar amount of suspected mortgage fraud plummeted by nearly $10 billion.
During calendar-year 2012, depository financial institutions filed 867,990 Suspicious Activity Reports with the Financial Crimes Enforcement Network.
Total SARs filings, which include mortgage fraud as well as other types of suspicious activity, accelerated from the previous year, when FinCEN received 798,588 reports.
The data were spelled out in the Mortgage Loan Fraud Update for calendar-year 2012.
However, while overall SARs filings increased, mortgage loan fraud SARs fell to 69,277 from 92,561 in 2011 — the worst year on record based on data back to 2001. FinCEN noted it was the first year-over-year decline since it began tracking mortgage fraud SARs.
“FinCEN thinks the CY 2012 decline was the result of an unusual spike in mortgage lending fraud SAR filings during CY 2011, primarily due to mortgage repurchase demands on banks,” the report stated. “Those repurchase demands prompted review of mortgage loan origination and refinancing documents, where filers discovered fraud, which was then reported on SARs.”
SARs that included the term “repurchase” in the narrative made up 13,132 of last year’s mortgage fraud reports, sinking from 40,861 in 2011. In 2010, just 8,625 SARs were tied to repurchases, while the number was even less each of the prior years.
But on non-repurchase SARs, the total peaked in 2010 at 61,847 — though last year’s non-repurchase SARs climbed to 56,145 from 51,700 in 2011.
FinCEN’s data indicated that 57 percent of mortgage fraud from last year’s SARs filings occurred at least five years prior, while another 17 percent happened between four and five years earlier.
But on 2011’s filings, just over a quarter was on fraud from more than five years prior, nearly a third was between four and five years previous, and almost a quarter happened between three and four years earlier.
The report said that 46 percent of all mortgage fraud reports it received during the past decade were received between 2010 and 2012.
Ignoring the SARs filing date and instead focusing on the year of origination, reports topped out at 137,945 in 2007, though 2006 was close behind at 137,702.
Mortgage fraud began to surge in 2005, with fraudulent originations more than doubling from 2004 to 67,313, and tumbled in 2008, when just 46,485 instances occurred.
So far, only 9,597 incidences of mortgage fraud have been identified on 2012 originations, fewer than 14,417 in 2011.
Based on an analysis of SARs filings by dollar amount, mortgage fraud was reported on an estimated $27.581 billion in loans last year.
The dollar volume associated with SARs filings sank from 2011, when the estimated amount was $36.928 billion.
Using the same analysis, the dollar amount of estimated losses was $3.094 billion in 2012, off slightly from $3.288 billion the previous year.
Based on total mortgage fraud SARs filed, California had the most during 2012. Florida followed, then New York and Illinois.
California also dominated the list on a per-capita basis. But Nevada was next, then Florida, Arizona and Washington, D.C.
The report indicated that foreclosure-rescue schemes were associated with 4,427 of last year’s mortgage fraud SARs, up from 2,799 in 2011. In 2010, just 556 SARs had the phrase “foreclosure rescue” in the narrative, while prior years reflected even fewer such filings.
