Fraud risk control is commonly recognized as an effective way to avoid loan buybacks.
Avivah Litan, vice president and analyst at Gartner research firm, says lenders who want to remain competitive in fraud management are also aware that they “cannot continue doing business as usual.” Instead of obsolete paper-based alerts and manuals they “expect their risk management system to have an intuitive and interactive workflow” that can instantaneously evolve along with emerging fraud patterns.
Recent changes in prefunding requirements for government-sponsored entity loans also are challenging lenders to update their strategies and technology to be able to minimize prefunding risk and deliver high quality mortgage loans.
Catering to that demand, Tim Grace, CoreLogic senior vice president of fraud analytics, says financial service providers like CoreLogic are developing new tools that give lenders the power to adapt their strategies and policies to required changes and the ability to “respond within minutes as new fraud schemes appear.”
CoreLogic Credco, Santa Ana, Calif., recently introduced FinalCheck, which consists of FraudCheck, CreditCheck and AppCheck. These “critical data verification” tools automate prefunding risk evaluations by conducting instant verifications of borrower credit, loan application and fraud data that are ultimately presented for review to lenders in an easy-to-read report.
The stated goal is to help lenders satisfy GSE requirements and reduce repurchase risk that starts with a CreditCheck “gap” analysis on credit information between pre-approval and prefunding combined with AppCheck searches that review CoreLogic loan application databases and the Mortgage Electronic Registration System for undisclosed loans.
FraudCheck verifies that neither the borrower or loan participants are on a Department of Housing and Urban Development or other investor exclusionary list to provide data users with “critical insight on any potential prefunding risk indicators” before loans are submitted to the GSEs.
According to John Bauer, senior vice president of credit and transportation services for CoreLogic Credco, nearly 6% of applicants will have their debt-to-income increase by more than 3% between prequalification and prefunding, “making those loans a candidate for rejection or a buyback.” An additional 6.83% of loan applicants will have a debt-to-income that exceeds 45% at prefunding, meaning a significant number of these loans are “at risk as well.”
FinalCheck was designed to enable users to proactively monitor debt-to-income ratios and other loan risk factors, which is facilitated by CoreLogic’s Nd Merge technology that allows users to quickly collect and organize diverse data risk factors into a reporting format.
Litan says “new and sophisticated mortgage fraud schemes can emerge overnight” so a flexible tool that enables lenders to change their rules, add an alert or change a workflow “within minutes of finding a new fraud trend” are crucial to fraud risk management.
This lender demand is imbedded in CoreLogic’s updated version of LoanSafe Fraud Manager.
The customizable platform offers users more access, speed and control over their fraud management systems and minimizes reliance on information technology departments when addressing everyday needs of fraud prevention.
Loan data and analytics criteria are lender-driven and can be changed from month to month or loan program to loan program, and also allow lenders to deploy new data sources and new analytics such as rules and scorecards.
Once lenders have identified the population of loans that most need attention, LoanSafe Fraud Manager “prioritizes and determines the optimal action steps needed.”
CoreLogic said it is designed to improve operational efficiency “by ensuring fraud prevention is repeatable and reproducible every time, as directed by the system and the lender-supplied best practices.”
Plus, an interactive workspace presents loan, borrower and collateral information within the same browser-based interface that includes clickable, drill down information on all relevant fields such as Social Security number, address, phone, and access to a customizable menu of tools such as maps, verifications and reverse lookups.
