The Agency Insider with Linda McGlasson

Homeowner Beware: Mortgage Fraud Scams Abound

Homeowner Beware: Mortgage Fraud Scams Abound

It's been almost a year since the Financial Crimes Enforcement Network (FinCEN) issued its red flag advisory about foreclosure scams. Now it looks like the agency sees another spike in mortgage modification scams hitting the U.S.

FinCEN and other regulatory agencies have warned the financial services industry and homeowners about these scams. Now FinCEN says it has received hundreds of Suspicious Activity Reports(SARs) regarding the fraud.

In the third quarter of 2009, banks and credit unions submitted 15,697 mortgage loan fraud SARs -- a 7.5 percent increase over the same time in 2008.

Now, in these SARs, the primary suspicious activities surround loan modifications dealing with occupancy misrepresentation, social security number discrepancies and altered or forged documents.

The two most common form of borrower scams involve conning homeowners into signing quit-claim deeds to their properties. In the first scheme, scammers -- once they get the homeowner to sign -- sell homes out from under the former owners to straw borrowers, and the homeowners subsequently receive eviction notices.

In the second most popular scam -- just like I blogged about last July -- the fraudsters falsely claim affiliations with lenders to convince distressed homeowners to pay large advance fees for modification services, but then do nothing to keep the borrowers in their homes.

Don't think for a moment that there isn't some prosecution going on in this arena. The FBI has already stepped up mortgage fraud investigations and has assigned task forces and groups to detect, indict and prosecute this crime .

Clearly, mortgage fraud isn't going away anytime soon, so keep your eyes and ears open to any possible scams hitting your institution and customers.

It might not be the most damaging form of fraud hitting financial institutions these days. But it means everything to your customer.

About the Author

Linda McGlasson

Linda McGlasson

Managing Editor

Linda McGlasson is a seasoned writer and editor with 20 years of experience in writing for corporations, business publications and newspapers. She has worked in the Financial Services industry for more than 12 years. Most recently Linda headed information security awareness and training and the Computer Incident Response Team for Securities Industry Automation Corporation (SIAC), a subsidiary of the NYSE Group (NYX). As part of her role she developed infosec policy, developed new awareness testing and led the company's incident response team. In the last two years she's been involved with the Financial Services Information Sharing Analysis Center (FS-ISAC), editing its quarterly member newsletter and identifying speakers for member meetings.

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