Mike Summers is a vice president at Veri-tax
, a top provider of tax verification and fraud management solutions to the mortgage lending and consumer credit industries. He is responsible for developing and executing the firm’s national marketing campaigns and overseeing its wholesale and resale training initiatives. For this edition of In this Corner, Summers give his take on mortgage fraud and technology's increasingly important role in preventing it.
HousingWire: Investors want fraud completely removed from MBS. How can Veri-tax help accomplish that?
First of all, the potential for fraud exists throughout the entire mortgage process, and even though MBS is on the back end, it still is vulnerable to the entire process. Obviously the potential for fraud exists in the origination process, but there could also be fraud on the back end with the packaging of loans, and also in the secondary market.
Borrower identity and income verification on all these levels is important. We provide this, but also do more. For example, there can often be a disconnect, or a leap of faith based on relationships (depending on how you look at it, this is also a possible area of insider fraud) between the loan originator and the purchaser of the loan. If you’re a lender doing verifications, the most important thing is to have an identifier on every loan that produces an audit trail, and preserves the records, so that everyone associated with the loan knows it has been verified. Not everybody does this, but we do.
We also do this as a controlled third party. We have no bias about whether the loan actually happens; we have no idea how much a person needs to make in order to get his or her loan.
As an industry, however, I don't know if we can ever entirely remove the potential for fraud. But certainly all sectors of the business -- from lenders to servicers to investors -- need to keep up with the technology that prevents fraud, and arm themselves with the most updated tools available.
HW: Is Dodd-Frank one of the best things to happen to your business? How about the mortgage finance industry broadly?
Dodd-Frank has been good in the sense that it's created demand for our solutions, plus we've been preaching the need for borrower verifications long before the bill came together. However, there's still a huge amount of work ahead and a lot of confusion about what's going to come from the new rules.
Some in our industry -- and we're certainly among them -- are concerned that the pendulum could swing too far into the area of over-regulation. If you make it too difficult for people to get loans and for lenders to process them, you have less volume, and that obviously affects everybody, including us. So we're actually a bit anxious to see what happens.
The other thing Dodd-Frank has done is it has created a mad dash toward verification providers, and not all of them are fully equipped. Speed and price are definitely important when it comes to borrower verifications, but just as important are compliance and security. Not everybody is focused on these things, and sooner or later it's going to lead some lenders into trouble. For example, there a lot of companies that are coming out of the woodwork and some are emailing transcripts without encryption. That's insanely non-compliant, and very risky.
HW: Who should be more concerned about the electronic transfer of mortgage data? Investors, servicers or borrowers?
It's really everyone. Certainly borrowers should be concerned about the secure transfer of their financial information. But when you think about it, all parties have a stake in the secure transfer of data, as they're all exposed at different vulnerability points.
HW: What's your perspective on whether the IRS will ever provide real-time transcript requests, the impact it would have, and what it will take for it to happen?
I think it will take some time. Looking at the issue from the point of view of the IRS, they are the one government entity responsible for protecting income information for all Americans, so they need to be extra careful when contemplating a move to real-time transcripts. When they do, there needs to be a system of checks and balances, or some control measure in the middle, similar to the way the Social Security Administration handles verification requests on Social Security numbers. Some may say the IRS is slowing up the process, but the security on that data is always going to be really strong.
Under the right conditions, it will be great to have real-time transcripts, and I think it will save lenders a lot of time and effort and speed up the decision-making process. Generally speaking, however, it's not the borrower verifications that are slowing up the mortgage process, as we can get this information within a one- to two-day timeline, compared to the four-week average time it takes to complete a mortgage loan. In fact, the IRS has handled the recent increase in demand for 4506-T requests tremendously well. Many in our industry didn't think they would, but they did.
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