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How can lenders ensure loan quality among higher volumes?

First American's FraudGuard solution helps lenders proactively identify fraud risks and comply with regulations

Modern lenders need reliable tools with robust analytics to assess and mitigate risk and enhance loan quality. In addition to traditional fraud risks, COVID-19 and its complications create new opportunities for “bad actors.” Employment and income verification and property valuation require reasonability tests to detect fraud early in the mortgage lifecycle.

FraudGuard by First American uses best-in-class data and real-time due diligence to detect fraud, provide investor compliance, reduce repurchase risk and automate loan quality checks.

Leveraging public, private and proprietary data sources, FraudGuard helps lenders to:

  • identify potential fraud risk and errors in mortgage applications
  • comply with regulations
  • improve the application review process through greater speed and efficiency
  • increase the quality of loans

First American’s FraudGuard solution is a comprehensive support tool for lenders, designed to quickly and accurately identify risk in mortgage transactions.

“First American has developed the next-generation risk mitigation solution,” said Paul W. Harris, head of First American’s mortgage analytics business. “We provide clients access to our vast inventory of data and analytic APIs, many of which are built around FraudGuard core competencies, such as identity, occupancy, property ownership and industry watchlists.” 

“Clients can consume these APIs earlier in the lending process to address key loan quality issues and leverage FraudGuard downstream for a comprehensive loan view, creating workflow efficiencies while reducing turn times and operational costs,” Harris continued. “The deep understanding we have of our clients’ workflow allows us to provide highly customizable solutions, making FraudGuard unequalled in the marketplace.”

FraudGuard’s highly tuned, smart analytics and supporting data assets are also configurable by loan program type, enabling lenders to define rule sets and alert messaging based on their own needs.

The report output is dynamic and displays data evidence that supports the analytics, while suppressing unnecessary information.  These features streamline the process, allowing for quick reviews. 

In addition to the new loan guidelines put in place by government-sponsored enterprises (GSEs) due to COVID-19, many lenders are implementing their own overlays with requirements beyond what they’d typically use with investors. FraudGuard alerts can be easily adjusted to encompass these metrics.

“When we originally set out to build FraudGuard, the main focus was mortgage fraud, but it’s evolved into something much more than that – helping lenders mitigate risk and stay within guidelines,” said Jen Menard, senior director of product with First American’s mortgage analytics business.

“And in this new fluid, dynamic environment, it now helps lenders do deeper research into property ownership and liabilities, like previous and current foreclosure activity and homeowner and condo association data.”

As lenders work to mitigate risk in the COVID-19 environment, FraudGuard is a valuable tool in the following areas of the mortgage loan life cycle.

  • Forbearance risks: As the GSEs allow lenders to offer forbearance to borrowers on up to three mortgage payments, these forbearances will cause strain on liquidity for many non-bank lenders as well as an increase in borrowers trying to miss payments when they do not qualify. FraudGuard can help verify a borrower qualifies for forbearance with employment and income alerts.
  • Refinance risks: Refi risks occur when a borrower submits false income information to persuade the financial institution to modify or refinance the loan on more favorable terms. As the 4506-T is unavailable now, the risk for fraud here is higher. First American recommends using FLEX (FraudNet Loan Exchange Review) alerts to identify loan shopping and income discrepancies, as well as checking for multiple credit inquiries in Debt Monitoring.
  • Verification of Employment (VOE) with process change: Though the GSEs have removed the VOE guidelines and will accept paystubs and banking statements for VOE, most lender overlays are requiring a verbal VOE. FraudGuard users can enable all applicable online business alerts to ensure good contact information.
  • Loan slamming risks: Loan slamming occurs anytime anyone is playing the gap. As stay-at-home and social distancing orders have impacted recording offices, there is a greater gap risk in many areas. FraudGuard users can use FraudGuard FLEX to check for multiple open applications/orders, and the Undisclosed Debt Monitoring module to check for multiple credit report inquiries.
  • Identity risks: As more states authorize the use of Remote Online Notarization (RON), identity verification is more important than ever. While FraudGuard cannot be used to verify identity for RON, enabling all applicable borrower identity alerts in the platform can help ensure valid identity information earlier in the loan process.

“As GSE guidelines continue to change, First American FraudGuard is committed to keeping clients up to date and in compliance,” said Brian Haber, FraudGuard product manager.

“Our innovative features, built on best-in-class data and analytics and supported by an award-winning client services team, enable us to support lenders to face the ever-changing challenges of our industry,” Haber continued. “The new measures for security and reliability will help mitigate fraud risk, streamline processes and improve the customer experience.”

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