Data Facts Lending Solutions Blog

Important Numbers Mortgage Lenders Should Know About Mortgage Fraud

by Susan McCullah

May 31, 2018 10:54:44 AM

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Here is some important information Fannie Mae shared recently about mortgage fraud. These statistics are based on results of 2016 and 2017 mortgage fraud numbers.

Lenders need to stay aware and educated of the types of mortgage fraud in the marketplace, as well as the lending solution services that minimize the risk and combat the chances of falling victim to fraudsters.

Grab Infographic NOW (Wire Transfer Fraud)

Tips Are Increasing

In the 4th Quarter of 2017, the tips received about mortgage fraud doubled from the 4th Quarter of 2016. The increase is driven by lenders who are self-reporting. In 2016, lenders only opened 29% of the mortgage fraud tips; in 2017 they opened 53% of them.

Lender self reportFannie Mae reported 10 key Fraud Characteristics for 2017:

  • Forgery
  • Occupancy fraud
  • Identity theft
  • Liabilities fraud
  • Credit fraud
  • Employment fraud
  • Appraisal fraud
  • Loss mitigation fraud
  • Asset fraud
  • Collusion

There were 10 main fraud schemes employed by criminals in 2017. The most prevalent of these were; foreclosure rescue, flipping, equity stripping, loss mitigation schemes, and Ponzi/investment club schemes. Less popular schemes were reverse mortgage/HELOC schemes, builder bailout, origination fraud, buy and bail, and affinity fraud.

Mortgage fraud is a serious and costly crime that isn’t going away. In fact, fraudsters continuously come up with new ways to rip off mortgage lenders. That’s why lenders need to view mortgage fraud as a serious risk to their organization and put a plan in place to fight it every day, in a variety of ways.

Here is more information on fraud schemes and their characteristics.  
These numbers are disturbing and lenders must take the risk seriously to protect their processes and minimize their risk. Smart actions are:

  • Mortgage professional education. Every participant in the mortgage loan process needs to know what to look for and the steps to take if they suspect mortgage fraud.
  • Extra reporting measures. Your lending solutions vendors should be able to offer additional data in regards to mortgage fraud. Identity checks, social security verifications, employment verifications, wire transfer fraud reports, and more are available to help lenders combat mortgage fraud.
  • Additional follow up. If there is a red flag, following up is key in determining if a fraudulent activity is about to happen. Mortgage professionals should never be shy about asking for additional proof of identity or making further inquiries into a claim that isn’t supported.

Mortgage lending institutions need to do all they can to mitigate their risk, and their clients' risk, of falling victim to fraud. As Fannie Mae's numbers show, it continues to be a problem this year and will most likely continue to evolve into new schemes as the years progress. Education, awareness, and proactive preparation are the best ways to stop fraudsters from damaging your organization. 

Topics: mortgage fraud, fannie mae, mortgage lending services

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