Today, the Federal Financial Institutions Examination Council (FFIEC) released The Detection and Deterrence of Mortgage Fraud Against Financial Institutions: A White Paper, which was produced by the July 13-24, 2009 FFIEC Fraud Investigations Symposium. The purpose of the white paper is to raise awareness of, and to assist regulatory examiners in identifying, mortgage fraud schemes perpetrated against financial institutions and to provide guidance for deterring these schemes. This white paper substantially updates the 2005 White Paper released by the FFIEC, The Detection, Investigation, and Deterrence of Mortgage Loan Fraud Involving Third Parties (2005 White Paper).
Since the 2005 White Paper, mortgage fraud schemes have increased in number, volume and type due to the general economic environment, lax underwriting standards and declining housing values. This increase has resulted in significant losses to both financial institutions and to their customers and is a hot topic for legislators as well as regulators. While the white paper does not establish any new examination policies or procedures or impose new requirements on regulated financial institutions, it does detail common mortgage fraud schemes, including the mechanisms used and common participants engaged in perpetuating such fraud. For each of these schemes, the white paper provides examples, indicators for examiners to look for that warrant further scrutiny, and best practices to mitigate and/or deter these schemes.