Data Facts Lending Solutions Blog

The High Cost of Mortgage Fraud

by Jennifer Hamby

Dec 5, 2014 11:53:53 AM

rising_costs

Currently, Over 80,000 mortgage applications each year have what is considered “HIGH FRAUD RISK” and the cost to lenders and the financial system are estimated to be BILLIONS!! 

Mortgage fraud is defined by the Mortgage Bankers Association as “any misrepresentation to the lender from a mortgage applicant for the purpose of being approved for a mortgage that the applicant would not otherwise qualify in order to obtain property, or simply profit”. It is a crime with severe penalties yet continues to be one of the fastest growing crimes in the US.

While all states have some mortgage fraud cases each year, some states are “riskier” than others, such as California.  It has the highest percentage of mortgage fraud, whereas South Dakota is the state with the lowest instances of mortgage fraud. 

Detection and Prevention is paramount. 

Recently Fannie Mae released their most recent mortgage fraud findings of 2014.   There were 7 different misrepresentation findings, and the percentage of fraud for each is listed below.

  • Credit-1%  The borrower’s identity and/or credit history was/were misrepresented
  • SSN-3%  There is a significant discrepancy in the SSN(s) used to qualify the borrower(s).
  • Liabilities-46%  The borrower’s liabilities were misrepresented
  • Value-1%  The property value was inflated and there was a non-property-related misrepresentation in the loan transaction
  • Property-16%  A specific material fact about the property and/or the comparable sales was misrepresented
  • Income & Assets-14%  The borrower’s income/employment information was inflated or fabricated
  • Occupancy-19%  The borrower’s intent to occupy the subject property was materially misrepresented.
 

As you can see the misrepresentation of liabilities continues to be a major factor in mortgage fraud.  This can be easily mitigated through both pre and post debt monitoring.

A recent growing trend is the increase in Identity Fraud, with an increase of approximately 9% percent.   The increase is due to an increase in the frequencies of alerts where a borrower’s name is not present or does not match the SSN trace and by comparisons with previously submitted applications.  A SSN trace is an instant search that can help detect and prevent Identity Fraud.

Data Facts, Inc. is committed to preventing mortgage fraud.  We offer a variety of resources and solutions to help you detect and prevent every mortgage misrepresentation mentioned above. 

Topics: MBA, Mortgage, lending solutions, Mortgage compliance, mortgage fraud, tax return verifications, TRV, BankerVMS

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