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No fiery horse, no speed of light nor cloud of dust. Not even a Hi-Yo Silver. But, we’re returning to those thrilling days of yesteryear. No, not with the Lone Ranger, but a recent study found that Mortgage Fraud rides again.
In their latest Mortgage Fraud Report, CoreLogic is reporting that in the second quarter of 2016 the risk of fraud in loan applications increased. They also report that this trend may continue. That ain’t good news.
At the end of the 2nd quarter, mortgage fraud risk increased almost 4%, as compared to the 1st quarter. With the drive toward increased homeownership, fueled by low down payment loans, special loan programs for first-time and low to moderate income buyers, and some easing of credit standards, the likelihood of a continued rise in mortgage-related fraud continues to go up.
The potential for fraud is not limited to the new programs or purchases. Low rates have motivated many to refinance. We saw how these programs can also be the subject of fraud in the recent crash. Unfortunately, where there’s a will, there’s a way. This time, it’s not a good “way”.
With increased production comes more exposure for fraud related issues. Issues, whether intentional or not, that may cost lenders huge sums of money…again.
This is not to say that the new programs and credit standards are bad. These programs will definitely help more people realize their dreams of homeownership, and bring more buyers into the housing market.
However, lenders and investors need to be on the lookout for those unscrupulous applicants and others involved in the home buying and financing transaction to identify and weed out the potential for fraud.
This can be done through the application, processing and underwriting process, by training staff, to be on the lookout for anomalies in the application and supporting documentation, supported by a robust pre and post-closing loan review program.
Fraud is not always easy to detect. But, it could be lurking there in the shadows somewhere. It’s important that everyone is trained and alerted to be on the lookout. Increased production is great. But, make sure it doesn’t come with a hefty price tag from quality and compliance violations. As production increases, especially from one source, you need to carefully review that source and the loans to ensure everything is on the up and up.
In the end, it’s much better to do fewer quality loans, that are saleable, than a larger volume that may contain fraud, quality and/or compliance problems. Make sure that when Fraud rides again – it doesn’t make a stop in your shop.
Hi-Yo Silver!
