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$20 Billion in Fraud During 2010

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An analysis of government data released Tuesday suggests that more than $20 billion in mortgage fraud was reported last year. While banks and credit unions filed more reports of mortgage fraud in the fourth quarter, more than two thirds of that fraud happened at least three years ago. The activity represents a strong contrast to the fourth-quarter 2009, when half as many occurrences were that old.

Last year, 70,472 suspicious activity reports tied to mortgage fraud were filed by financial institutions, according to the 2011 Mortgage Loan Fraud Update — Suspicious Activity Report Filings from the Financial Crimes Enforcement Network.

Activity has risen from 2009, when SARs filings were 67,507.

Based on activity during just the final three months of last year, filings were 18,759, worse than the prior period’s quarterly volume of 16,693. Volume was down, however, from the fourth-quarter 2009, when 18,884 reports were filed.

But like distant stars in the sky, SARs filings reflect mortgage fraud that occurred at an earlier point in time.

In fact, 69 percent of all mortgage fraud SARs filed during the fourth-quarter 2010 happened at least three years earlier, the report indicated. That’s a sharp decrease from just a third of filings in the final quarter of 2009 that were based on crimes from three years earlier.

One possible reason for the surge in older activity could be the rise in repurchases — which has prompted mortgage bankers who were forced to buy back loans to investigate files for breaches by originators from which they purchased the loans. In their attempts to push pack the loan to loan correspondents or mortgage brokers or possibly even find liability with service providers — investigations uncover instances of mortgage fraud.

Exactly two-thirds of last year’s activity was on loan amounts between $100,000 and $500,000, FinCEN reported.

An analysis by of FinCEN’s data suggests that SARs were filed on around $20.5 billion in mortgages during 2010. The analysis factored in the number of filings by loan-range amount.

Based on the analysis, nearly three-quarters of last year’s fraud, on a dollar basis, involved mortgages between $250,000 and $1 million.

A close correlation exists between states with the highest fraud rates and the highest foreclosure rates.

In February, one out of every 119 housing units in Nevada faced a foreclosure filing – the worst of any state — according to data from RealtyTrac.

In the FinCEN report, Nevada had the worst per-capita rate for full-year 2010 SARs filings. California — which had the third worst foreclosure rate last month — was No. 3 in the per-capita ranking.

FinCEN said Florida had the second-worst fraud rate, while the Miami-Fort Lauderdale-Pompano Beach metropolitan statistical area had the worst per-capita rate of any U.S. community.

Illinois was the fourth-worst state, and Georgia was No. 5.

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