Mortgage Fraud may be defined as "a deliberate misrepresentation and deception: One party deceives another by misrepresenting information, facts, and figures" concerning a mortgage application.
CoreLogic, one of the nation's largest third party mortgage vendors that provides fraud technology promotes: "We develop technology applications and platforms that streamline workflow for mortgage lenders and servicers, capital market investors, and real estate professionals. Our cloud based loan origination and asset management platforms offer flexibility and convenience." For the past couple of years CoreLogic has developed an extensive database for use in fraud prevention technology. They continue to do so. And, they aren't the only ones.
A couple of years ago Mortgage.orb had posted an article entitled, "CoreLogic Mortgage Fraud Database Keeps Growing." They argued that mortgage lenders are not communicating to one another when fraud has occurred and by the time it is reported, it is too late. CoreLogic and similar companies are bridging this gap of communication, "In 2009, CoreLogic, the residential property information, analytics and services provider launched its proprietary Mortgage Fraud Consortium database, which keeps lenders abreast of current and emerging fraud trends in the loan origination cycle."
According to CoreLogic's Mortgage Fraud Brief for Q1 of 2018, "Mortgage fraud is up 10% from Q1 2017 and up 4% from Q4 2017."The majority of mortgage fraud is in connection to purchase transactions over refinances and since purchases are only increasing, fraud will most likely increase.
CoreLogic offers an incredible and powerful tool for mortgage lenders to use and often, for example. This tool provides insight into the profile of applicants to an extent that other information does not and cannot provide, especially if there is possible dishonesty present. Inconsistency on a loan application may be a great indication but good fraud tools automatically detect multiple facets of risk by searching records for:
- Income Falsification
- Identity Fraud/Theft
- Employment Inconsistencies
- Owner Occupancy
- Undisclosed Debt
- Straw Borrowers
- Valuation Risk/Property Flipping
- Third Party Certification
Fannie Mae published Common Mortgage Fraud Red Flags in August 2017. They note, "Mortgage fraud red flags are inconsistencies in the information presented in an application or a loan file that would cause someone to take a second look to eliminate mistakes or identify misrepresentations." Wire fraud has been prevalent in addition to other types of fraud. Fannie lists some common red flags:
- Social Security number discrepancies
- No credit history or “thin” credit files
- Employment discrepancies
- Documentation that includes deletions, correction fluid, or other alterations
- Different handwriting or type styles within a document
- Seller is not currently reflected on title
In my experience and in connection to a recent CoreLogic brief informal survey, foreclosures, undisclosed properties, and multiple mortgage applications, are popular areas of fraud concern for mortgage bankers and investors. Sometimes credit, borrower documentation, application/borrower disclosure, title, and other sources of information do not provide the previously mentioned concerns.
It is hard to believe but it happens on a regular basis!
In an age of unlimited access to information, it is still possible to miss the facts about a particular circumstance but it is, more importantly, about verifying the facts accurately. Information is shared rapidly but information is only information. It does not mean it is accurate information. Investigation is usually warranted. Communication is key. Speak to colleagues, managers, borrowers, title, and ask questions about anything that doesn't make sense.
It is important to remember that mortgage applicants may not always be intentionally fraudulent.