We believe your bank should file the SAR, and management should report the filing to your Board of Directors.

The FDIC's rules state the following about additional reporting at 12 CFR 353.3(b)(2) and 353.3(c), as follows:

(b)(2)  In situations involving violations requiring immediate attention, such as when a reportable violation is ongoing, the bank shall immediately notify, by telephone, an appropriate law enforcement authority and the appropriate FDIC regional office (Division of Supervision) in addition to filing a timely report.

(c)  Reports to state and local authorities. A bank is encouraged to file a copy of the suspicious activity report with state and local law enforcement agencies where appropriate.

In this situation, since “mortgage fraud” appears to be at issue, we believe it also would be prudent to report the incident to state authorities, such as the Illinois Attorney General's office and the Illinois Department of Financial and Professional Regulation (which oversees the Illinois Mortgage Fraud Task Force).