Suspected incidents of mortgage fraud reported by financial institutions were up by 5 percent last year. But the annual origination of fraudulent mortgages was down 29 percent.
Suspicious Activity Reports filed by financial institutions when mortgage fraud is suspected climbed to 70,533 during fiscal 2010, a report from the Federal Bureau of Investigation said. The prior year’s SARs filings amounted to 67,190.
The FBI outlined its findings in the 2010 Mortgage Fraud Report Year in Review. The report was prepared by the FBI’s financial crimes section.
Losses on SARs filings climbed to $3.2 billion in the fiscal year ended Sept. 30, 2010, from $2.8 billion in fiscal 2009.
More than $10 billion in home loans originated during 2010 had fraudulent application data. The volume sank from $14 billion in fraudulent originations during 2009.
The 29 percent drop in production with fraud was more than the 19 percent decline in overall industry originations reported by MortgageDaily.com.
There were 3,129 pending investigations during fiscal 2010. The previous year, pending investigations numbered 2,794.
Cases involving more than $1 million accounted for 71 percent of all pending investigations.
With 292 pending cases, Las Vegas was the busiest FBI field division. Los Angeles cases were 195, and New York had 185 pending cases. Tampa, Fla.’s, pending 177 cases followed, and 141 pending cases in Detroit ranked it as the fifth-busiest field division.
By SARs filed, Los Angeles’ 10,391 was nearly double No. 2 Miami’s 5,849.
More than half of last year’s cases were on fraud that occurred in 2009 and 2010. Another 36 percent of last year’s investigations were from either 2007 or 2008 crimes, and the rest happened between 2001 and 2006.
“Loan origination schemes” — when an unqualified borrower lies on the application but intends to repay the loan or when straw buyers are used who have no intention of repaying the loans — represented 62 percent of last year’s SARs filings for mortgage fraud.
The FBI said that fraud on commercial real estate loans mostly mirrors residential activity. The players are the same, as is the process.
Residential mortgage fraud is involved in half of bank failures investigated by the FBI.
Emerging schemes include, accounting fraud and insider mortgage fraud at financial institutions, are driving some bank failures.
The FBI reported that its “Operation Stolen Dreams” involved 1,215 criminal defendants and yielded included 485 arrests, 673 informations and indictments, and 336 convictions. The defendants in the related cases were allegedly responsible for more than $2.3 billion in losses.
