FinCEN Proposes Rules for Government-Sponsored Enterprises To Combat Mortgage Fraud


As part of its ongoing efforts to combat mortgage fraud and other related financial crimes, on November 8, 2011, the Financial Crimes Enforcement Network (FinCEN) published in the Federal Register a Notice of Proposed Rulemaking (NPRM) that imposes a requirement on certain housing government-sponsored enterprises (“Housing GSEs”) to develop anti-money laundering (AML) programs and to file suspicious activity reports (SARs) with FinCEN. GSEs subject to the NPRM are the Federal National Mortgage Association (“Fannie Mae”), Federal Home Loan Mortgage Corporation (“Freddie Mac”), and the Federal Home Loan Banks. FinCEN determined that these Housing GSEs are “financial institutions” subject to the AML program and SAR reporting requirements under the Bank Secrecy Act (BSA). Comments to the NPRM must be submitted to FinCEN on or before January 9, 2012.

In the NPRM, FinCEN points out that the main role of the Housing GSEs is to support the primary mortgage market and affordable housing programs through the purchase, guarantee, and securitization of mortgage loans, as well as the extension of loans secured primarily by mortgage loans and real estate related assets. Because the Housing GSEs are involved in providing financing to the residential mortgage market, they may be exposed to the risk of fraud, particularly when investing in whole mortgage loans. In other words, while purchasing mortgage loans, extending loans secured by mortgages and other real estate-related collateral, and engaging in a variety of related financial activities, the Housing GSEs have access to information on suspected mortgage fraud and money laundering valuable to law enforcement and regulators engaged in the investigation and prosecution of mortgage fraud and other financial crimes.

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