It’s unclear the implications that COVID-19 will have on the housing market, but it appears the demand for mortgages isn’t going anywhere any time soon. When the market is competitive, buyers want to jump in, and as a result many will break the rules. Mortgage fraud is an ongoing problem that can cause you financial harm, so you should be taking the necessary precautions to avoid it. Here’s 5 quick facts you should know about mortgage fraud.
1 in 123 mortgage applications contain indicators of fraud.
In 2019, about .81% of mortgage applications contained at least one form of fraudulent activity. This percentage decreased from .92% in 2018.
The fastest-growing form of mortgage fraud is occupancy fraud.
Occupancy fraud occurs when the applicant lies about whether the home will be occupied. Because lenders typically charge lower rates when the buyer intends to live in the home, many applicants will indicate this on their mortgage application, even when the property is for investment only.
Applicants are finding new ways to commit income fraud.
Income fraud occurs when an applicant fraudulently misstates their income on a mortgage application. Although many possible cases are caused by applicant errors made in good faith, technology has made it significantly easier for fraudsters to break the rules. Even a simple web search can reveal websites that specialize in generating doctored pay stubs designed to fool lenders.
Properly screening your employees can help mitigate mortgage fraud.
Enticed by better business prospects, bank employees are sometimes motivated to help applicants commit fraud. To protect against this, lenders should conduct background checks on new employees, and provide ongoing employee training and oversight.
Looking for discrepancies in the applicant’s ID can identify any red flags.
Take the steps to prevent mortgage fraud from impacting your business by implementing strategies to screen your applicants for fraudulent activity. Identify red flags that highlight possible fraud, like discrepancies between SSN and address, or between name and address. Ask Data Facts about our ID Investigation Report that can monitor these factors, and reduce the possibility of mortgage fraud.