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.

“Identity theft is not a joke, Jim!” This was Dwight’s reaction as Jim arrived at work donning his trademark glasses and dress shirt on NBC’s The Office. To the mortgage lending community, Identity theft is, in fact, not a joke. And the realities of it can be a quite a bit more sinister than a prank played between two coworkers. So it’s no surprise the Federal Trade Commission has declared next Monday as the beginning of Tax Identity Theft Awareness Week.

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.

We know mortgage fraud comes in various shapes and forms. Catching it early is key if mortgage lenders want to protect their organizations from costly expenses associated with the crime. 

There are several mortgage lending services that address mortgage fraud, and being proactive and savvy to the common ways consumers try to "pull off" mortgage fraud is necessary. 

Watch out for these key indicators of potential mortgage fraud. 

In today’s financial climate, it is becoming more evident by utilizing bundled services from a single provider Lenders will be able to serve clients more effectively, profitably and will emerge as industry leaders.

Why should you bundle services? First of all, one vendor equals fewer headaches. It standardizes operations and saves time. You don’t have to call, email and wait for responses from multiple vendors. Secondly, it builds a stronger relationship. This makes for a more positive overall experience. Lastly, it helps you to stay in compliance. Compliance is ALWAYS a top priority. Bundling services minimizes the risk of being out of compliance by having all your paperwork from ONE source. Your chosen vendor should be constantly providing compliance information for your records.

More sophisticated fraud schemes and new regulations mean your mortgage lending services need to include fraud and verification tools optimized for today’s lending environment. Now, more than ever, you need to know whether the information behind loan documentation is authentic.

Since mortgage lending has changed over the last few years and more changes are coming in the years ahead, it’s imperative that your information provider has the ability to keep up with the evolution in the market.

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.

The social security card looks like an innocent little thing. However, its 9 digit number packs a powerful wallop during the mortgage process. People who commit mortgage fraud often attempt to utilize other people’s socials to acquire mortgage loans.

According to a recent Fannie Mae Fraud Report, mortgage fraud involving social security number misrepresentations is up almost 10%! 

Over the last few years, GSE’s, the CFPB and the OCC have issued new vendor management requirements placing increased scrutiny on how banks and nonbanks are managing third-party risk.

It is clear that the regulators and government agencies expect more oversight.

In the servicing business, it has always been critical to have a strong vendor management and oversight program for any outsourced functions or third-party services purchased on the behalf of others. However, depending on the function or company size, the focus may have been more on performance management and less on due diligence and vendor risk.

According to a bulletin published last year by the CFPB, the bureau wants to ensure that consumers are protected from irresponsible service providers and that servicers are contracting with ethical third parties. The CFPB expects banks and nonbanks to have an effective process in place to manage the risk of outsourcing. Specifically, a supervised entity, at minimum, must thoroughly review the service provider’s policy and procedures, internal controls and training materials.