MortgageReal Estate

Mobile, online home purchases raising mortgage fraud costs

Every $1 of fraud costs depository originators $5.34: report

The rise in mortgage-related fraud over the past three years was largely due to a surge in online and mobile-only mortgage transactions. The pandemic and growing mobile channel fueled the number of fraud cases with application fraud being a key entrant point for fraudsters, a new report analyzing fraud trends suggests.

Fraud costs largely came from consumers seeking to buy a new home through online and mobile transactions, according to LexisNexis Risk Solutions. Firms with 50% or more retail transactions could have a higher cost of fraud and larger volume of average monthly attacks, according to the firm’s True Cost of Fraud report.

The report surveyed 360 risk and fraud executives to analyze fraud trends in the mortgage originator, services, title and settlement markets. 

For originators, servicers, title and settlement firms, the cost and volume of mortgage-related fraud has been high, costing depository originators, or mortgage lending companies, the most. Every $1 of fraud costs them $5.34 and non-depository originators $4.66, according to LexisNexis Risk Solutions.

Across all segments, including depository originators and non-depository originators, more than half of transactions were conducted through online and mobile channels, which represented the majority of fraud costs. 

Mortgage originators, servicers and title and settlement companies pointed to identity verification as the top challenge for mortgage-related fraud. Difficulties of assessing digital identity attributes such as email and phone numbers contributed to issues such as distinguishing between legitimate and fake consumers, the report noted. 

Biden administration recommends proactive cybersecurity measures

“Wire fraud risk remained at heightened levels with several cybersecurity risk events during Q1 2022, as well as a heightened level of overall data and transaction security risk post the Russian invasion of Ukraine,” FundingShield CEO Ike Suri said.

Presented by: FundingShield

“Although the future is uncertain, it’s safe to assume that the accelerated movement to online and mobile transactions will continue to grow and that mortgage originators, servicers and title and settlement companies should build out and enhance the digital customer experience while protecting against fraud,” said Dawn Hill, director of real estate fraud and identity strategy at LexisNexis Risk Solutions.

A multi-layered solutions approach integrated with cybersecurity and digital customer experience operations showed that firms can lower fraud and subsequent costs, the report said. Integrating fraud prevention with cybersecurity operations throughout the digital customer experience and layering in artificial intelligence and machine learning were recommended as ways to strengthen fraud prevention. 

 “A successful fraud detection and prevention approach involves an integration of technology, cybersecurity and digital experience operations in a way that addresses the unique risks from different transaction channels and payment methods, as well as by individuals and types of transactions,” Hill added. 

A growing number of companies have been focused on deterring fraud in the real estate market. Most recently, CertifID, a platform that validates parties involved in a real estate transaction, received $12.5 million in a series A funding round led by Arthur Ventures. The firm aims to launch a solution to prevent fraud in mortgage payoffs through the funds. CerifID, which has more than 30,000 users monthly, provides as much as $1 million of insurance coverage on every transaction. The firm hasn’t had any insurance claims so far, according to CerifID.

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