MBA Looks to Create National Fraud Database

The Mortgage Bankers Association issued an interesting press release last week about its Lender Technologies Corporation entity, who is out to create a national fraud registry that lenders could — in theory, of course — tap into to help identify fraud early in the origination process.

At the request of an industry group made up of several of the largest residential mortgage lenders as well as Fannie Mae and Freddie Mac, and as part of ongoing efforts to combat mortgage fraud, a task force of MBA’s Residential Board of Governors is exploring the creation of a national database, which will use technology to provide an early warning system for potential fraud. LTC is requesting information to determine the availability of contractors that have the experience, expertise and staffing to develop, deploy and operate such a database.

Here’s a copy of the formal Request for Information document issued by LTC. It’s an interesting proposition, but like many industry pushes, it will only work if there is sufficient buy-in from loan originators to push their information into a central repository. Most originators view this sort of data as part of their competitive advantage in the market, so there is likely to be a significant hurdle to overcome here in terms of protecting even a perceived competitive interest. In addition, I have to wonder who will bear the cost burden here — is the MBA planning on developing, deploying and operating the database with its own funds, or is it expecting originating institutions to also pay to access the global fraud database? Doing so would push the cost of origination up, which I know isn’t something many in the industry would want to see. Perhaps the MBA/LTC has already thought about these sorts of issues, but they’ll need to be addressed if either party is serious about bringing a solution to the table that ends up being truly meaningful for the mortgage industry.

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