VIENNA, Va. (AP) -- Reports of likely mortgage fraud increased by 7 percent in the first half of 2010 as banks scoured older loans for problems, the government said Tuesday.
The Financial Crimes Enforcement Network said banks filed 35,135 reports of suspicious activity indicating mortgage fraud during the six-month period, up from 32,926 in 2009.
FinCEN, part of the Treasury Department, collects reports on suspicious activity from banks to combat money laundering. It is part of President Barack Obama's Financial Fraud Enforcement Task Force, which includes 20 federal agencies, 94 US Attorney offices, and state and local partners.
The increase in mortgage fraud was fueled by banks scrutinizing older loans for underwriting problems and fraud. Banks are trying to force companies that sold bad loans to buy them back. Sellers of loans often guarantee that the loans meet underwriting standards and were not offered fraudulently.
Mortgage fraud reports about loans more than two years old made up 78 percent of the reports in 2010, up from 44 percent in 2009. FinCEN said that reflects a continued focus on loans offered from 2006 to 2008, at the peak of the housing bubble.
A growing number of the reports refer to bankruptcy. Seven percent mentioned bankruptcy in 2010, compared with 1 percent in 2006 and 2007.
The reports show the growing popularity of a fraud scheme known as flopping. Flopping occurs when properties in foreclosure are sold at an artificially low price. The buyer resells the property at a higher price and pockets the difference.
More of the reports refer to short sales and broker price opinions. Short sales allow people facing foreclosure to sell their homes for less than what they owe on their mortgage. As part of the process, lenders ask a broker what the property is worth in a weaker market.
References to those issues in fraud reports are consistent with flopping, FinCEN said.
Published: Thu, Dec 16, 2010
