As servicing fraud schemes rise in which scammers are taking advantage of distressed borrowers, it is important for lenders to step up their efforts in detecting and preventing these false scams from taking place.
Rachel Dollar, an attorney who represents lenders in mortgage fraud and recovery matters, was the keynote speaker at CoreLogic’s winter 2012 mortgage fraud consortium meeting. At the meeting, she stressed that now is an important time for lenders to focus on instituting stronger contractual provisions with their third-parties who are involved in the origination process.
The consortium meeting brought together many of the nation’s top lending companies to discuss fraud trends and ways to mitigate fraudulent activities.
According to Dollar, servicing fraud is on the rise, specifically in short sales, REOs and bid-rigging. She
added that all of these types of fraudulent schemes are being prosecuted or investigated by the authorities right now.
With distressed sales so prevalent across the country, flipping is also very common right now. Dollar said she thinks flipping schemes are going to be the main focus for the industry over the next couple of years.
However, Dollar is not seeing a great deal of fraud on the origination side. There is an increase of false documentation fraud, which Dollar said appears to be caught by lenders before funding happens.
“Lenders are managing to catch a lot of the documentation fraud prefunding,” Dollar told this publication. “We see downpayment falsifications, so asset fraud is another big issue.”
Tim Grace, senior vice president of data and analytics product management at Santa Ana, Calif.-based CoreLogic, agreed with Dollar’s assessment that fraud is more complex right now because there are so many false documents.
“There is just a lot of documentation that is being provided that is not initially asked for that is actually falsified. Things like college transcripts, divorce degrees, and deposit or bank statements,” Grace said.
The main goal for any fraudster when running their scheme is to reduce the number of questions from a lending institution. Lenders are having trouble detecting fraud activities because scammers are constantly changing their schemes to keep lenders unaware of their tactics.
“Even if they (scammers) learn about how lending institutions find fraud and how they address fraud once they find it, scammers alter the way they try to push fraud through and the manner in which they continue to hide it in order to keep it under the radar,” Dollar said.
“For instance, once it became public knowledge that early payment defaults and first payment defaults were triggering review, they started making longer payments instead,” Dollar added. “So every time the lending institutions implement some type of measure in order to track or discover something earlier, the fraudsters also change their strategies in order to prevent the discoveries of their actions.”
