1. Mortgage Fraud: FinCEN and FBI Reports The Anti-Money Laundering Association May 21, 2008

2. Mortgage Fraud and Terrorism Headlines from the Mortgage Fraud Blog (www.mortgagefraud.org)www.mortgagefraud.org FBI Joint Terrorism Task Force Makes Arrests in Fraud and Money Laundering Cases Man Suspected Of Bin Laden Link Accused of Fraud Man awaiting trial on terrorism charges pleads guilty to mortgage fraud FBI says Hezbollah raising money through Mortgage Fraud

3. Agenda Mortgage Fraud Basics Highlights of FinCEN and FBI reports Fraud Types Fraud Schemes Red Flags Best Practices

4. Mortgage Fraud Basics Fraud for housing Misrepresentations by the applicant for the purpose of purchasing a property. Although applicants may embellish income and conceal debt, their intent is to repay the loan. Fraud for profit Elaborate schemes, typically involving multiple loans, perpetrated to gain illicit proceeds from property sales. Gross misrepresentations concerning appraisals and loan documents are common in fraud for profit schemes and participants are frequently paid for their participation.

5. Mortgage Fraud The appraisal described the above property involved in a fraud scam as “recently renovated condominium” to include Brazilian hardwood, granite countertops, and a value of $275,000.

6. Fraud Reports FinCEN Mortgage Loan Fraud An Update of Trends based Upon an Analysis of Suspicious Activity Reports April 2008 FBI 2007 Mortgage Fraud Report April 2008

7. Mortgage Fraud SAR Filings Source: FinCEN

8. Growth in Mortgage Fraud Illinois75.8% California71.3 Florida53.0 Michigan51.5 Arizona48.7 Growth in mortgage fraud SARs from depository institutions, 2006 vs. 2005. Source: FinCen

9. MARI Fraud Index Florida215 Nevada204 Michigan200 California170 Utah156 Georgia125 Virginia114 New York94 Minnesota90 Source: Mortgage Asset Research Insititute, LLC

10. Fannie Mae Misrep Zip Codes 1.554Minneapolis, MN 2.303Atlanta, GA 3.482Detrooit, MI 4.381Memphis, TN 5.330Pompano Beach, FL 6.331Miami, FL 7.891Las Vegas, NV 8.551St. Paul, MN 9.923Victorville, CA 10.925Moreno Valley, CA Top 10 zip codes (first three digits) for mortgage misrepresentation Source: Fannie Mae

11. Fraud Hot Spots 1Q2008 Detroit Miami Tampa Washington – Baltimore Chicago Cleveland Ft. Myers Based on number of misrepresentation insurance claims filed in first quarter 2008 Source: The Prieston Group

12. Fraud Types Income/asset/debt misrep43.0% Forged/fraudulent docs28.0 Occupancy fraud14.4 ID fraud/theft13.6 Appraisal fraud13.1 Straw buyer5.7 Property flip2.7 Based on a statistical sample of SARs filed between April1, 2006 and March 31, 2007. Source: FinCen

13. Fraud Types Occupancy fraud63.3% Hidden debt35.0 Employment26.7 ID fraud/theft13.6 Straw buyer10.0 Appraisal fraud5.0 Fraud types found in misrepresention insurance claims, first quarter 2008 Source: The Prieston Group

14. Emerging Fraud Schemes Identity Theft Builder Bailout Seller Assistance Short Sale Foreclosure Rescue Reverse Mortgages

15. Identity Theft Identify theft up 95.6% over previous report Primarily associated with “fraud for housing” Subject of new FACT Act regulations requiring identity theft procedures by Nov. 1

16. Builder Bailout Builder inflates sales price Builder loans borrower the down payment Loan appears to have equity Actually 100%+ LTV

17. Seller Assistance Scams Perpetrator finds desperate seller Inflated appraisal Buyer purchases at inflated price, borrows based on inflated appraisal Perpetrator pockets difference between inflated sales price and original asking price.

18. Short Sale Loan in foreclosure Perpetrator buys home for less than fair value Perpetrator sells home at actual value or flips at inflated value

19. Foreclosure Rescue Home in foreclosure Perpetrator convinces homeowner he can save home from foreclosure In worst scenario, homeowner signs over home to perpetrator

20. Loan Characteristics Single borrower Borrower owns rental property Stated income Purchase transaction No realtor involved

21. Best Practices Closing instructions instruct closing agent to notify the lender prior to closing the loan if – title has changed hands within 180 days – mortgage is 25% larger than previous mortgage made within 180 days – other transactions involving the borrower(s) or the subject property Closing Instructions instruct closing agent to only accept funds from the borrower and only from an account verified by the lender as part of underwriting/processing

22. Best Practices Perform a verbal VOE using directory assistance or similar third party service Obtain a copy of borrower's business license Obtain a signed 4506T for nonsalaried borrowers Obtain and review an independent credit report on all broker transactions Funds to close must be verified and seasoned for at least sixty (60) days Check investor ineligible lists

23. Red Flags Application Appraisal Credit report Sales contract Title Asset verification Employment verification Income HUD-1

24. Best Practices Perform a review of both the seller and buyer columns of the HUD-1 prior to funding for uncommon contributions and/or unusual payouts to parties that are not noted as lien holders on the title commitment Perform a comparison of the title commitment, the appraisal, and the sales contract on all purchase money loans to ensure the owner of record on the commitment/binder matches the owner on the appraisal and the seller on the sales contract

25. Contact Info Jim Mitchell Director - Business Development 813-996-9671 jmitchell@crosscheckcompliance.com Mike Forester Managing Director 847-612-2314 mforester@crosscheckcompliance.com CrossCheck Compliance LLC 11 South LaSalle Street, Fifth Floor Chicago, IL 60603 312-346-4600 www.crosscheckcompliance.com