Mortgage fraud is once again on the rise, but it’s not the same type of fraud we’ve seen before.
Traditionally, most mortgage fraud involved borrowers lying about their income, assets or debts. According to Fannie Mae’s most recent Mortgage Fraud Trends report, that has changed.
Based on the GSE’s fraud program data from 2016 and 2017, the GSE reported that the three most popular types of fraud being reported now are forgeries, occupancy fraud, and identity theft.
So how do you prevent these rising types of mortgage fraud?
The unfortunate news is that mortgage fraud may not be 100 percent preventable, but there are definitely proven strategies that reduce fraud risk. Here are three simple steps anyone can take now.
- Increase QC Protocols
The type of quality protocols you have in place have an enormous impact on fraud prevention. They’re particularly important for non-QM products and other types of loans that involve greater risk than conventional products. This includes creating a culture of quality not just quantity and monitoring throughout the mortgage process.
That means your pre-closing and post-closing QC efforts have to be top-notch. At StoneHill, we are costantly evaluating and adding to our QC checklists, which can help originators and servicers avoid becoming victims of fraud. Tougher protocols will help you stay compliant with industry regulations and investor guidelines, too. This includes your review of the reviewer and implementation of corrective actions where applicable.
- Outsource Origination Support
Lower origination volumes and rising loan costs are making it difficult for lenders to hire extra staff to handle big swings in volume. Trusted, third-party domestic outsourcing partners can offer variable cost structures, so that lenders can scale up or down more nimbly and keep costs down. As a side benefit, outsourcing origination support to a trusted third party provider with proven processes can reduce fraud, too, because they have the staff, skills and experience to know what to look for.
- Conduct Regular QC Reviews
Mortgage fraud often shows up in loan files through errors and defects. By performing regular QC reviews, you’ll be better able to detect evidence of fraud before it spirals out of control.
In fact, every lender should do an annual review of their QC plan that should include not only processes and controls that prevent fraud from occuring in the first place, but also includes steps that must be followed to remedy issues once they are found.
The lesson here is that the mortgage industry may never rid itself of fraud altogether. However, every lender and servicer can decrease their chances of losing business and the trust of their clients by beefing up their fraud defenses. The tactics are already available—they only need to be used.
If mortgage fraud has you concerned, or if you have questions about other types of threats we haven’t mentioned here – drop us a line at info@TheStoneHillGroup.com. We are always here to help.