Faster mortgage closings could boost fraud, risk consultant warns
A quicker, digital mortgage origination process could improve customer service but it also may make home lenders more susceptible to identity theft, according to LexisNexis Risk Solutions.
"Digital mortgage absolutely has a lot of promise but it's also something that we have to look at how we do it so we don't create new avenues for fraud to be able to be perpetrated," said Nick Larson, business development manager in the real estate and mortgage space at the company.
Identity verification is identified as a top mobile channel concern by 36% of mortgage production companies, according to a recent lender breakout of the company's annual True Cost of Fraud survey. Digital mortgage lenders find synthetic identities are involved in 25% of the fraud they experience.
Mortgage lenders are fraud targets less often than other types of consumer lenders, but they are only slightly better at preventing fraud, LexisNexis Risk Solutions finds.
There were 851 fraud attempts per month on average at mortgage lenders and 30% of those attempts resulted in a loss of funds, according to the survey.
In comparison, other credit lenders experienced 1,362 attempts, 34% of which were successful.
While mortgage lenders are less often targets of fraud than other consumer lenders, fraud tends to have a high cost for the mortgage industry.
Each dollar's worth of fraud at mortgage lenders resulted in an additional $2.90 in expenses related to operational changes needed to address the risk. In comparison, the additional cost for other types of lenders is $2.78.
"We see that there's two to three times the cost" of the original fraud incident, said Kim Sutherland, senior director of fraud and identity management strategy at LexisNexis Risk Solutions.