Compliance Blog

Written by Shari R. Pogach, Regulatory Paralegal

FinCEN has put out another advisory on suspicious activity related to mortgage loan fraud.  FIN-2012-A009 consolidates information from previously issued reports and offers examples of common fraud schemes and potential “red flags” that may indicate mortgage loan fraud activity.  The advisory is meant to help credit unions be more thorough when completing any Suspicious Activity Reports (SARs) in connection with suspicious mortgage loan transaction activity.

The advisory provides a list and description of frequently reported or described schemes and scams from SARs that law enforcement has identified such as: 

“Foreclosure rescue scams:  Targets financially distressed homeowners with fraudulent offers of services or advice aimed at stopping or delaying the foreclosure process. Some of these scams require homeowners to transfer title – or make monthly mortgage payments – to the purported “rescuer,” rather than the real holder of the mortgage. Some foreclosure rescue scams require homeowners to pay fees before receiving “services,” and are known as “advance fee” schemes.

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Home Equity Conversion Mortgage (HECM):  Financial institutions need be aware of illegal “reverse mortgage” schemes, which targets seniors who own a home or who are coerced into taking title to a home, for the purpose of stealing or otherwise acquiring some or all of the funds the senior receives from a government HECM program. HECM fraud may involve other frauds, including appraisal fraud (to increase the stated value of the home), investment fraud to acquire the HECM funds from the senior under the guise of future profits for the senior, and identify theft to acquire HECM funds without the knowledge of the senior who owns the property.”

In addition, FIN-2012-A009 gives examples of possible red flag indicators of illegal activity related to mortgage loan fraud.  The agency cautions that, “No single red flag will be definitive proof of such activity and many apply to multiple fraud schemes.”  Credit unions also need to look at red flag(s) in the context of other indicators and facts.

When completing a SAR on suspected loan fraud you should indicate the type of mortgage loan fraud with the appropriate code in the FinCEN SAR and give a detailed description in the narrative. For any activity without a corresponding code, identify it as “Other” and describe the activity in the narrative.

Where available, FinCEN also requests credit unions to include the Conference of State Bank Supervisors’ (CSBS) National Mortgage Licensing System and Registry (NMLS) assigned “NMLS Unique Identifier” in the narrative.  Both the Federal Housing Finance Agency (FHFA) and the Department of Housing and Urban Development (HUD) require that any loan purchased or securitized by Fannie Mae and Freddie Mac, or submitted for insurance by the FHA, must include the NMLS Unique Identifier for the company and individual mortgage loan originator (MLO) that originated the mortgage loan.