The number of mortgage fraud reports in the US rose 31 percent in the first quarter, as many banks are taking another look at loan documents questioned by mortgage investors and insurers during the housing boom, according to a report.
According to the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN), there were 25,485 “suspicious activity reports” related to alleged mortgage fraud in the first quarter of 2011, up from 19,420 reports over the same period last year.
In an article by The Wall Street Journal, this increase was mainly attributed to large home loan servicers performing detailed reviews of loan documents, after receiving demands from loan investors to repurchase mortgages that had fallen into defaults.
In January, the Bank of America (BofA) agreed to pay US$2.8 billion to Fannie Mae and Freddie Mac to cover bad mortgages that the government-controlled companies had acquired from the bank’s Countrywide Financial mortgage unit.
James H. Freis Jr., Director of FinCEN, said repurchase requests covered in the report concerned activities between 2006 and 2007. About 86 percent of mortgage fraud reports involved activities that occurred over two years ago.
“The industry is slowly making its way through the most problematic mortgages,” said Mr. Freis.
Fannie Mae, Freddie Mac and other major mortgage investors in the US have been trying to regain losses by forcing banks to buy back mortgages in which lenders or borrowers have made fraudulent statements.
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