The Illinois Criminal Code specifically prohibits mortgage fraud, defined as making “any false statement or report . . . with the intent to influence in any way the action of a financial institution to act upon any application, advance, discount, purchase, purchase agreement, repurchase agreement, commitment, or loan.” 720 ILCS 5/17-10.6(d). (This offense was added to the Criminal Code as part of the IBA’s “Illinois Financial Crime Law” in 2003.) 

In addition to filing a suspicious activity report (SAR), banks in this situation may wish to contact local police or the FBI. Further, the bank may wish to pursue contractual remedies against the borrower. Because any documents related to the loan may be involved in litigation, we recommend using the record retention period required by HUD for those files: “If any litigation, claim, negotiation, audit, monitoring, inspection or other action has been started before the expiration of the required record retention period records must be retained until completion of the action and resolution of all issues which arise from it, or until the end of the required period, whichever is later.” 24 CFR 92.508(c)(6).