Falsified applications has taken over the top spot for the type of mortgage fraud committed as reported in a recent New York Times article, according to a recent LexisNexis report. (Loan Fraud)
Alarmingly, 80% of all mortgage fraud involves
“Professionals”. No, it’s not professional bad guys who are the perpetrators but professionals in the industry, i.e. originators, real estate agents and appraisers.
With business down, it seems some people want to make money the old fashioned way; steal it! And you wonder why mortgage lenders get a bad name. As usual a few bad apples give the entire industry a black eye.
Florida continues to be ranked tops in loan fraud but the problem is wide spread and increasing as perpetrators continue to move into new areas to stay one step ahead of the law and regulators. Lenders need to be more diligent than ever in monitoring and tracking their originator activities and loan performance. They also need to watch the realtors from which the loans are referred and the appraisers used to determine values.
When an originator, branch or area is doing business which seems too good to be true, it probably is! You may find that business is getting a little help from fraudulent activity. Remember, misrepresentations and fraud, whether a lender is involved or aware, will violate any investor (loan purchaser’s) reps and warrants and are grounds for an immediate loan repurchase.
Just another reason (and a very good one) why lenders need to carefully monitor their loan manufacturing process to ensure quality and integrity, not just for the loans but those involved in the loan process as well.
Pre-closing audits are critical in this process as these may detect inconsistencies in the loan application data and/or with the information used for the loan’s approval. Periodic review appraisals can’t hurt especially when lending in a new area, or on loans from a new originator or source. Know your lending partners; trust but verify. In the long run, it’s better to be safe than sorry.
The game has changed. Play different (and play fair).