Mortgage Daily Logo

Regulation Requires SARs Filings by Non-Bank Lenders

Mortgage News

Mortgage brokers and non-bank mortgage lenders will soon be required to file reports when mortgage fraud is suspected. The additional compliance burden is likely to lead to an increase in filing statistics even though actual fraud activity could retreat.

Non-bank residential lenders will now be required to file suspicious activity reports under new regulations finalized Tuesday by the Financial Crimes Enforcement Network, which is responsible for enhancing national security and deterring and detecting criminal activity.

SARs reports help identify straw buyers, fraudulent flips and short-sale fraud.

Lenders and originators need to establish anti-money laundering programs and file suspicious activity reports, as is already the case with other types of financial institutions, according to the agency.

FinCEN Director James H. Freis Jr. calls SARs “a critical source of information to law enforcement and regulatory agencies in their investigation and prosecution of mortgage fraud and a wide range of other financial crimes.”

FinCEN said it is involved in ongoing work directly supporting criminal investigations and prosecutions. Its activities are connected to the Financial Fraud Enforcement Task Force and the Residential Mortgage-Backed Securities Working Group.

“FinCEN believes that the new regulations will help mitigate some of the risks and minimize some of the vulnerabilities that criminals have exploited in the non-bank residential mortgage sector,” the statement said. “Analysis of SARs reported in FinCEN’s annual, quarterly and special fraud reports, shows that independent mortgage lenders and brokers originated many of the mortgages that were the subject of bank SAR filings.”

FinCEN said it proposed in November 2011 that Fannie Mae, Freddie Mac and the Federal Home Loan Banks be subject to anti-money laundering and SARs requirements.

Today’s announcement has its roots in the terrorist attacks at the turn of the century.

“This goes back all the way to nine eleven and the congressional result and reaction, that was the USA Patriot Act,” Richard J. Andreano Jr., partner, Ballard Spahr, said in a telephone interview. “What Congress had determined at that point is the people involved in nine eleven had used the U.S. financial system to fund their activities.”

Andreano explained that regulators originally delayed the implementation of the act against non-bank lenders and originators as they studied whether it was intended to apply to the group. A rule was proposed in October 2010 for non-bank lenders and, as Andreano interprets it, mortgage brokers.

The final rule will go into effect 60 days after it is published in the Federal Register. The Compliance date will be six months after publication.

Andreano warns non-bank lenders that once the regulation is in place, one of the first things regulators will look at will be anti-money laundering programs.

“Those who are found to have inadequate programs will likely face significant regulatory repercussions, including, it could be, stiff penalties,” he said. “This is one of those that is very near and dear to the heart of regulators.”

During fiscal-year 2010, there were 70,533 mortgage fraud SARs filed, according to the Federal Bureau of Investigation.

Andreano said that the number of filings is likely to rise as a result of the new regulation.

But he also noted that mortgage fraud activity is likely to decline because of the required reporting.

“The hope is by implementing these requirements, that, in fact, those who would be likely to engage in fraud will now think twice about it and not do it,” Andreano said, “but in fact if they do decide to go ahead that this will lead to certainly more investigations because there will now be more reporting.”

Related Posts

NewDay USA CEO Rob Posner Expects 10% Increase in 2019 Mortgage Loan Volume

There is No Such Thing as a Free House …

Over the past several years, those who service loans in the State of Washington(1) have seen a dramatic rise in the number of lawsuits in which delinquent borrowers seek to quiet title to their homes on the grounds that lenders are barred from foreclosing based on...

NewDay USA CEO Rob Posner Expects 10% Increase in 2019 Mortgage Loan Volume

The Mortgage Graveyard 2018 Archives

The Mortgage Graveyard 2018 Archives Failed, Struggling and Acquired Mortgage-Related Companies Non-Bank Closures 3 Bank Failures (FDIC) 0 Credit Union Failures 0 Total Mortgage-Related Failures 3  

NewDay USA CEO Rob Posner Expects 10% Increase in 2019 Mortgage Loan Volume

MBS Statistics

MBS Statistics Non-Agency Issuance 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 Private Label RMBS Issuance (S&P) $80 billion to $100 billion (est) $70 billion $34...

NewDay USA CEO Rob Posner Expects 10% Increase in 2019 Mortgage Loan Volume

Sample E-Mail

Sample E-Mail   Covering the Real Estate Finance Since 1999  Mortgage Industry News free news content | view headlines online  Advertorial Text Ad This ad includes a linked bold headline of up to 50 characters and up to 100 words of text. The ad can be...

Popular posts

How Long Does It Take to Refinance a Mortgage
How Long Does It Take to Refinance a Mortgage

So, you’re interested in refinancing your mortgage. Maybe you want some extra capital to do that home project you’ve always dreamed of, interest rates are nearing record lows, or you want to start consolidating debt. Regardless of the motivation behind the refinance,...

How Does Refinancing a Mortgage Work
How Does Refinancing a Mortgage Work

A home purchase is considered an investment, and a robust one at that. Savvy owners are constantly looking for new ways to reduce debt, save money, pay less in interest, and ultimately build equity. Refinancing is one way to leverage your investment and do just that....

What Does It Mean to Refinance Your Home
What Does It Mean to Refinance Your Home

You can think of refinancing your mortgage as a debt redo. Essentially, you’ll swap out the existing loan for a new one - ideally with better terms and conditions. Only this time it could help you save money on high mortgage payments, rather than just borrow it....

Setting up the Utilities in My New House
Setting up the Utilities in My New House

All the tedious, time-consuming home closing documents have been signed, sealed, and delivered. Your belongings are packed into what seems like a million boxes and you have a solid plan to haul all your existing furniture to the new place. Just as your boxes and...

When Is My First Mortgage Payment Due?
When Is My First Mortgage Payment Due?

Navigating your way through a brand new mortgage loan can be a difficult task, especially for first time homeowners. After handing over a large sum of money for the down payment and closing costs, it’s important to pay attention to the timing of your first mortgage...

Newsletter

Don’t worry, we don’t spam

calculate your monthly mortgage payment

Related Topics

Helpful Links

Daily mortgage rate trends

Best mortgage lenders

First-time homebuyers programs by state

Loan limits by state

Types of mortgages

APR vs interest rate

Understanding PMI