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from Local Attorney, Michael H. Wasserman

Thursday, May 1, 2008

MORTGAGE FRAUD & MONEY LAUNDERING


I help a lot of buyers slog through stacks and stacks of mortgage loan documents at closings. Anyone who has sat through a closing with me has heard "the routine" my explanation of the various disclosures and certifications that lenders subject their customers to.

Buyers produce photo ID to the closer. A whole lot of trees give there lives to help the lenders and title companies verify borrower identities and to warn borrowers of the penalties for mortgage fraud. Multiple promises that the borrowers have told the truth. Affidavits attesting that the Buyer is using his/her true signature. Stern warnings that the lender is going to comply with the Patriot Act. Even the scary FBI notice over on the margin here. Cynical me. I tend to poke fun at a lot of these documents, and all the redundancies, and the silliness attendant to them.

Turns out, I may be wrong for making light of these issues. Inman news reports today that:

About one in five suspicious activity reports banks file with federal regulators over concerns about a residential real estate transaction show signs of money laundering or tax evasion, according to a new Treasury Department report.

The report found evidence of money laundering or "structuring" -- transactions involving incomplete or falsified records -- in 20 percent of suspicious activity reports involving residential real estate transactions between 1996 and 2006.

The Treasury Department's Financial Crimes Enforcement Network also detected a steep increase in the incidence of filings that might involve money laundering after 2004, to more than 50 percent.

The most interesting point in the article? Speculation that money laundering in residential real estate is probably an even bigger problem than as reported; Banks don't file complaints when the loans are being repaid - and most laundering operations use the laundered money to pay the loans.

The complete Financial Crimes Enforcement Network report, dated April, 2008 is available here


No closings for me until tomorrow morning. I'll still probably crack wise about the anti-terrorist and anti-fraud disclosures, but I'll probably have an eye on buyer too - just in case.