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Even as the housing market slows, suspected mortgage loan fraud in the US rose 35% in the last year, according to an assessment released by the Financial Crimes Enforcement Network (FinCEN). FinCEN, an agency of the Treasury Department, conducted the assessment, which was based on an analysis of Suspicious Activity Reports (SARs) regarding suspected mortgage loan fraud. One explanation of the increase in SARs reporting is increased awareness of the potential for fraud. Many of the SARs reviewed included more than one characterization of suspicious activity in addition to mortgage fraud.

Even as the housing market slows, suspected mortgage loan fraud in the United States rose 35 percent in the last year, according to an assessment released by the Financial Crimes Enforcement Network (FinCEN).

FinCEN, an agency of the Treasury Department, conducted the assessment, which was based on an analysis of Suspicious Activity Reports (SARs) regarding suspected mortgage loan fraud.

One explanation of the increase in SARs reporting is increased awareness of the potential for fraud, FinCEN noted. Between 1997 and 2005, the number of SARs pertaining to mortgage loan fraud increased 1,411 percent, said FinCEN.

"Many areas of the United States saw double-digit growth in real estate volumes during 2003 and 2004. At the same time, mortgage loan interest rates were at a historic low," said the FinCEN assessment. "Although growth in the housing industry appears to be slowing in the first quarter of 2006, opportunities for fraud are still present."

Many of the SARs reviewed included more than one characterization of suspicious activity in addition to mortgage fraud. "False statement" was the most-reported activity in conjunction with mortgage loan fraud, while identity theft was the fastest-growing secondary characterization reported, said FinCEN.

The FinCEN assessment noted that the slowdown in the growth of housing prices could result in the housing industry becoming less attractive to investors, which in turn could result in a reduction in the reports of fraud for profit. However, the current housing trend could also lead to an increase in fraud for housing as the increased costs of housing decrease the number of qualified applicants.

"The current trend of rising interest rates and slowing housing equity growth could result in an increase of debt-elimination fraud schemes, especially for homeowners with adjustablerate mortgages [ARMs] and interestonly loans," warned FinCEN.

SARs included in the assessment reported suspicious activity related to mortgage fraud in all 50 states, the District of Columbia, Puerto Rico, Guam and American Samoa.

FinCEN's Office of Regulatory Analysis reviewed SARs that depository institutions filed between April 1, 1996, and March 31, 2006. A search of SARs containing "mortgage loan fraud" as a characterization of suspicious activity retrieved 82,851 reports, of which a statistically random sampling of 1,054 were reviewed for additional analysis.