If we were to view types of mortgage fraud as products, I think we have written about all of them. So you know about how the mortgage fraud itself is committed – but how about those perpetrating it? Taking a closer look at the types of people who commit fraud can enable you to segment those groups and have a strategy for each. We sort these into 3 tidy groups:
- People who plan to commit fraud and know what they are doing is a crime
- People who commit fraud, knowing that they have done something wrong but don’t see what they are doing as a ‘crime’
- People who commit fraud unwittingly
I would actually surmise that the 2nd two groups are responsible for the lion’s share of mortgage fraud today.
People who commit fraud knowing that they have done something wrong but do it anyways often see their transgression often as you would a ‘little white lie’. This is generally when a property is worth less than disclosed, or on foreclosure it looks different than described, or where self-employed income is disclosed as employment income or they supply a gift letter, when the down payment is not a gift.
The third group, people who commit fraud while not having a clue generally just don’t know their information! They actually think the information they have provided is right and until you prove them wrong they will either stand by it or say ‘I know’. This is where you see income that doesn’t match the paystub, under/overvalued home estimates, mortgages that have higher balances than disclosed and other people on title.
While one of these groups clearly has less character than the other – they are both committing forms of mortgage fraud that largely go unreported and sometimes include the assistance of other financial and mortgage professionals – many cases of small scale fraud often go unreported.
Does this mean that we can’t trust our clients and brokers? No, absolutely not. What it does mean is that we have to take steps to validate basic information at the application stage. Doing this greatly syphons out the examples listed above and enables your underwriters to work with their brokers or customers to get the correct information to see if there is in fact a good deal on the table and not funny business.
Equipping your underwriters and mobile mortgage specialists with tools that give them a place to validate homeowner information, a property’s sales history, value and registered mortgages, empowers them to do more to reduce your losses. Validating these four things at the application stage will greatly reduce the resources wasted underwriting deals that have issues and also lead to stronger relationships with insurers because your closure rates will soar – this is not to mention that your brokers will appreciate the heads up that there is an issue sooner in the process, also saving time and resources.
Don’t let any fraud, no matter the source, go unchecked. Whether your client is knowingly or unknowingly committing fraud, they are doing it all the same.
Purview For Lenders can help you identify fraud. For more about our tools, call us today at 1.855.787.8439.