Lending’s Latest Tool in Detecting
Borrower – Lender – RE Agent Fraud!
Fannie-Freddie-VA-HUD – have made it clear that lending fraud, appraisal fraud, kickbacks and other RESPA violations are high on the their radar post “the Great Recession”.
The good news for industry professionals is fraud will become rooted out faster and the bad actors in prosecuted; no one wants to see a repeat of the 2006 -2008 debacle.
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In 2016 federal prosecutors began receiving (directly from investors) loan applications where the preponderance of fraud is “obvious and deliberate”.
Before 2016: Typically the file “just died” on the underwriter’s desk, while the fraudster simply “vanished into the night” as criminal charges are rarely pursued against borrowers by lenders!
Recently to help identify fraudsters, lenders have begun using FraudGuard®, an automated, web-based tool which identifies risk and potential fraud in mortgage loans by utilizing public, private and proprietary data sources.
The service was rolled out in late 2015 and is the brain child of First American Title and (according to my sources) is now the primary tool for lenders to detect fraud.
Here are just a few of the methodologies:
Identity Validation
Validates and identifies potential risks associated with the borrower’s SSN including the state, date of issuance.
Phone & Address Check
Uses a reverse phone and address check to validate borrower’s info, employer phone and address.
Income & Employment Analysis
Analyzes the borrower’s income and employment utilizing industry norms for income levels.
MERS (Mortgage Electronic Registration System)
Identifies undisclosed loans, pending foreclosures, foreclosures for the borrowers and subject property.
Industry and Lender “Watch and Exclusionary Lists”
Compares ALL participant (buyer-seller-agent-MLO) names to an industry watch and exclusionary lists.
HUD LDP, HUD EPLS, and OFAC to identify high risk participants . Now lenders now us these shared databases so the fraudster can’t just move on to another unsuspecting lender.
Conflict of Interest
Checks all parties in the loan to identify possible conflicts of interest specifically looking for “non arm lengths transaction”.
NFPB (National Fraud Protection Database)
Checks the Interthinx proprietary database for mortgage fraud related (media) articles.
Associated Business Search
Reviews public data to determine if other businesses are associated with the borrower and if the buyer is hiding business losses or is clandestinely self-employed.
Occupancy & Ownership
Performs a nationwide search for properties owned by the borrower for occupancy issues, foreclosures and unidentified addresses. (“Occupancy fraud” is the most common form of buyer fraud).
In Conclusion
We’ve all had clients, who thought they could outsmart the system, who wasted our time as they scurried about trying to cover their tracks and when it came down to the 11th hour couldn’t close escrow because their scheme had unraveled.
Now lenders and RE professionals have protection against becoming unwittingly pulled into the schemes and before we spend time and energy.
Copywrite © August, 2018 Daniel Dobbs
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