Database Highlights Problem Loan Officers

There's a new cop on the beat in the war against mortgage fraud.

Introduced formally here last month at the National Association of Mortgage Broker's annual convention, the Coalition Against Broker Fraud has created a "comprehensive database" on brokers and other financing business insiders known or suspected to have been involved in fraudulent activity.

Finding a name on the list is not tantamount to an immediate indictment, the database's co-founders', Mitch Freifeld and Ron Litt, said, explaining that some people could be listed in error or out of retribution. But it should be enough to give pause to anyone considering using someone whose name is registered, they said.

Seeing a name on the list is a "red flag that you need to go a little deeper into the resume," said Freifeld, who is president of Global Net Branch Solutions, Clearwater, Fla.

"We've got to act aggressively," he said. "We have to attack it."

The co-founders said fraud against loan brokers goes much deeper than the $86 billion in losses estimated by the FBI in 2004. "It's putting entire companies out of business," Freifeld said. "And not just little, mom-and-pop companies, either. Nobody is immune."

Information for the database comes from a variety of sources, according to Mr. Litt, president of Advantage Credit, Pensacola. Some comes from the coalition's 15 originating members. And some comes from credit repositories, publicly available clearinghouses and "lots of other sources."

The data is melded together at the group's website, www.fraudcoalition.com, and is available at no charge to members, who are asked to contribute their own suspicions so the registry will remain up-to-date.

Freifeld and Mr. Litt said their effort replaces a similar one by the National Association of Mortgage Brokers that "has worked its way to the back burner." But NAMB spokesmen here said they have found it extremely difficult to assemble a clearinghouse of bad actors because each state collects different information, sometimes even collecting the same data differently.

Another grey area, according to Mr. Litt, is keeping such information current, as is the quality of background checks being performed on prospective employees. Often, examinations are done too fast and on the cheap, he said. And as a result, it could be months before a criminal activity is listed somewhere, if it is listed at all.

"The data is very disappointing," Mr. Litt said. "So there needs to be a force to create some kind of standard. That's what we're attempting. We can prevent fraud before it gets to the quality control department, because once it's there, it's too late. You've already lost money."

Freifeld, who has been arrested on numerous charges, including credit card fraud and bouncing at least one check (see related story), said the coalition is his way of atoning for his past transgressions. He and Mr. Litt said they paid thousands of dollars of their own money to build the database "because that's how important we think this is."

The co-founders said they would continue to operate the registry on a gratis basis for the next six to 12 months. "We will continue to eat" the cost, Freifeld said. "We're not looking to make any money on it. We're looking at this as a way to remain in business."

The coalition's membership includes American Pacific Mortgage, another co-founder; BNC Mortgage, NFM, Freedom Mortgage, American Home Mortgage, AllFund. Home Capital Funding, America's Mortgage Broker, American Home Loans, Radian, Challenge and Apex. The members are largely broker and lending institutions.

Membership will be open to others later this year. (c) 2006 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com