OFAC Screening Mortgage 2026: SDN List Checks and How to Handle Flags

OFAC screening is a federal compliance requirement that every mortgage lender must complete on every loan. The Office of Foreign Assets Control, a division of the U.S. Treasury Department, maintains the Specially Designated Nationals and Blocked Persons (SDN) list. Federal law prohibits any U.S. person, including mortgage lenders, from conducting financial transactions with anyone on that list.

Who Must Be Screened

Lenders must screen all parties to the transaction who are receiving funds or title. This includes all borrowers, co-borrowers, and guarantors. Many lenders also screen sellers and, in some cases, title agents. The screening must occur before or at application and may be repeated before funding. Most loan origination software has OFAC screening integrated into the application workflow.

How to Handle a False Positive

False positives are common. The SDN list includes names from many countries, and common names generate frequent false matches. When a match is returned, the lender must not simply proceed; they must complete a due diligence review to determine whether the match is a true positive or a false positive. This means comparing the borrower's identifying information (full legal name, date of birth, Social Security number, country of birth) against the SDN entry.

• ✦Name match only: a name match without confirming personal identifiers is not sufficient to determine a true hit
• ✦Confirming identifiers: date of birth, SSN, address, and physical description should be compared against the SDN entry
• ✦Documentation: document your false positive determination with a comparison of available identifiers; retain the file
• ✦True positive: if a true match is confirmed, the transaction cannot proceed; contact legal counsel immediately

Timing and Record Retention

OFAC screening should occur at or before application and again at or before closing. Retention of screening records is part of your Bank Secrecy Act and AML compliance program. Most lenders retain OFAC screening results and any false positive determinations as part of the permanent loan file. Regulators can request these records during examination.