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New Federal Compliance Requirements Could Cause Spike In Mortgage Fraud Numbers

NotaryBulletinIcon612.jpgReports of mortgage fraud continue to grow, and the numbers are likely to see an even higher spike with the implementation of new regulations by the Financial Crimes Enforcement Network (FinCEN), according to the Lexis Nexis 2012 Mortgage Fraud Report.

As of August 16, non-bank residential mortgage lenders and originators brokers — including subsidiaries — now must submit reports of suspected mortgage fraud to the federal agency. Previously, the reporting rules only applied to banks and other depository institutions.

“This step closes a regulatory gap and will augment the information available to law enforcement about suspicious activity in this sector,” said FinCEN Director James H. Freis.

The number of mortgage fraud reports submitted to FinCEN has been steadily increasing in recent years. In 2011 alone, the number of reports increased 32.6 percent, according to LexisNexis.

Many instances of fraud are being discovered as banks more closely examine loans that have gone into default. The new reporting regulations are expected to result in even higher numbers of mortgage fraud cases in coming months.

Federal law enforcement officials have noted that mortgage fraud scammers often use borrowed, stolen or faked Notary seals. There also is a growing incidence of identity fraud in mortgage scams.

While Notaries cannot prevent many schemes, they continue to play a critical role in fraud prevention by maintaining their Notary journals, which can provide valuable evidence in nullifying false claims of identity theft often linked to mortgage fraud.

Kelle Clarke is a Contributing Editor with the National Notary Association.

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