It seems that every single time new regulations are issued to try to mitigate mortgage fraud, scammers always seem to be one step ahead of financial institutions and are already preparing their next scheme.
At the 2013 Mortgage Bankers Associationís National Fraud Issues Conference in Hollywood, Fla., National Mortgage News hosted a roundtable that included top executives from risk mitigation firms who monitor various types of fraudulent activity such as loan modification scams, appraisal fraud, foreclosure rescue schemes, short sale fraud and bankruptcy fraud, as well as technology firms that provide software to lenders and servicers in order to prevent fraud from occurring within their businesses.
Moderating the discussion was Mark Fogarty, editorial director of the mortgage group at SourceMedia, and Evan Nemeroff, fraud reporter for National Mortgage News. They were joined by Tim Anderson, director of compliance services for DocMagic; Lisa Binkley, senior vice president of business development and mortgage solutions for Platinum Data Solutions; Darius Bozorgi, president of Veros; Becky Walzak, president of rjbWalzak Consulting; Connie Wilson, executive vice president of Interthinx; Andrew Liput, president of Secure Settlements; and Ed Gerding, senior fraud and risk strategist for CoreLogic.
In this segment of the discussion, the panelists explained the latest trends happening in mortgage fraud and what lenders and servicers can do to detect illegal loan applications they receive from a borrower.
Some highlights that were revealed by the panelists are that despite the growth of technology happening in the mortgage industry, the human element is still necessary to catch a fraudulent scam. Furthermore, this requires underwriters, loan officers and closing agents to be trained properly to notice inaccurate information that is submitted by a borrower in a loan application.†
FOGARTY: Obviously, people want to know what is the trend in fraud? Is it up or down? Is it stable? With the new entire universe of compliance and regulationsóhas that had any affect in helping currently or will it in the future?
WALZAK: Thereís an impression out thereóif you look at the straight numbersóit looks like fraud is decreasing. I think thatís misleading. We stopped doing no-documentation loans, but fraud didnít begin with no-documentation loans. Fraud was always there and people were just finding ways to do it again. And if we just donít seem to learn that we canít do this kind of lending and these kind of activities, then itís going to go back up.
BINKLEY: One of the things coming forth today, according to Fannie Maeís second-quarter report for their fraud reviews in post-closing loans, employment income is going up, short sale fraud is through the roof continuing, and weíre seeing a significant increase in asset misrepresentation. So regardless of all the industry regulation and all the paperwork that we are requiring borrowers to come to the table with, I really donít think that we are making that big of an impact on reducing the fraud in the sector.
ANDERSON: Unless thereís a way to truly automate it. One of the outcomes of the big robo-signing, $25 billion lawsuit was a large lender now has to come out with another piece of paper that signs and closes saying I really am the noteholder of record. If youíre going to commit fraud, youíre going to commit fraud. If you donít have a way to systematically automate this and authenticate it through databases, itís really not the paper and itís just going to get worse.
BOZORGI: Tim hit it on the head about automation. You do have to change the process as fraud isnít going to go away. Youíre going to see different flavors of it, depending on whatís going on at the given time. When you look at things like the UMDP program and even when you talk about appraisals or appraisal fraud with UCDP. For the first time now, appraisals and fully electronic standardized formats are being transmitted all the way through the process from the appraisers desktop all the way through to the investor. And Fannie and Freddie, for the first time now, passed the mandate for that program in excess of 10 million appraisals submitted into that system is unbelievable. They are now seeing stuff theyíve never saw before they actually acquired a loan, like where an appraiser who does a loan for B of A one week uses 123 Main St. as a comp and itís a three-bedroom, two baths and 2,500 square feet and two weeks later does another appraisal for Wells in which the same property is listed as a comp, but suddenly itís a four-bedroom, three baths, 3,500 square feet. They never knew that before because these loans were bought sight unseen. But itís that automation that Tim refers to, that standardization that is allowing people to see things they didnít see before.