Since the 1970s, banks have been required to report any suspicious house purchases to the FBI[1]. Now that mandatory reporting is netting mortgage brokers, too. Seattle area real estate appraiser Richard Hagar says that’s a good thing since about 80 percent of home loans go through mortgage brokers.
What does suspicious activity look like?
KPLU’s John Maynard pressed Hagar for details about what a shady house deal looks like. Hagar gave the example of a guy with a low-paying job wanting to buy a million dollar home. In other words, someone who’s income level doesn’t fit the house they’re buying.
What if you’re an upstanding home buyer and you get reported for being “suspicious?”
“If you are on the up and up,” Hagar says, “and get reported for being suspicious then you will likely get scrutinized. If you’re buying a a big, expensive house and it looks like you can’t afford it, that information will be delivered to the IRS, so you can expect to be audited. “
This leads Maynard to ask: “What’s the percentage of people who want to fraudulently buy a house?” Hagar’s answer was an eyebrow raiser.
“When we pulled out files randomly from banks and mortgage companies in a fraud investigation that I recently participated in, we found upwards of 80 percent had some kind of fraud in those loan files. Now, it wasn’t always the buyer. Sometimes it was the appraiser or another party. But whatever the particulars are, the government now wants this suspicious activity reported by mortgage brokers – something that many of them say they are not staffed up to do.”
Staffed up or not, it has to be done, says Hagar. The Bank Secrecy Act, which was passed in the 1970s, has been growing. The last extension came under The Patriot Act in 2009 which mentions mortgage brokers. They were exempted until mid-February of this year.
What if a mortgage broker doesn’t fill out a “suspicious” report?
Failure for not filling out a suspicious activity report (SAR) – if there’s an indication that something in a house purchase just doesn’t look right – can lead to a $100,000 fine and criminal punishment. The aim is to crack down on money laundering and other shady practices that involve property sales.
That gives new meaning to a clean house!
“Street Cents” is a monthly feature exploring real estate trends in the Northwest. The feature is published here and airs on KPLU 88.5 on the first Tuesday of the month during Morning Edition, All Things Considered and on Weekend Saturday Edition. [2][3]
References
- ^ report any suspicious house purchases to the FBI (www.fincen.gov)
- ^ Street Cents (kplu.org)
- ^ airs on KPLU 88.5 (1.kplu.org)
