econintersect.com
       
  

FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.



posted on 09 October 2017

The How, What And When Of Mortgage Fraud Discovery: 6 Touchpoints Over The Life Of A Loan - Part II Of III

from CoreLogic

-- this post authored by Bridget Berg

Based on my discussions with industry participants over the years, it’s safe to say most people believe that discovering fraud is mainly an origination workflow event. However, the truth is fraud can be discovered at a number of events in the life of a loan. Here’s a quick summary of where and when fraud can occur within your current workflow.

1. Prior to loan closing in the origination workflow - Verification processes, up-front fraud tools, underwriting, and pre-funding quality control are all great tools to identify fraud before it’s on the books. However, few lenders have installed strong tracking mechanisms to determine how much fraud is being averted, which loans or loan types, and which method accounted for the detection. This could be a valuable dataset to focus operational controls and to understand trends vs. treating fraud as a one-off.

2. Standard post-funding lender QC reviews - Fraud can easily go undetected in a QC review because it is not a fraud-specific review. QC sampling usually looks at about 10% or less of loan production. QC reviews are completed within the first 2-3 months after closing and usually re-verify credit reports, income and assets. Fraud found in these reviews are most likely to be undisclosed liabilities or job loss that happened prior to closing. Credit reports will consistently uncover most new debts, but asset reverifications may not be returned and may just show the current asset picture versus what it was at the time of the original asset document. Similarly, income verifications may not be returned, or, if part of a collusive scheme, be returned with false information again. Unfortunately, organized schemes are usually sophisticated enough to pass through this type of review.

3. Investor QC - Investors typically perform some level of QC due diligence in the first few months after acquiring the loan. Again, as noted above, fraud is not the primary focus of these reviews and are most likely to find issues like undisclosed liabilities and job loss prior to closing. Investors usually have options for Indemnifications or repurchase requests.

4. Early Payment Default (EPD) reviews - Loans that become 60 to 90 days delinquent in their first 6 to 12 months are often routed to a special QC review queue. Given the nature of EPDs, fraud found in these reviews will represent a much higher percentage of the reviewed population. Unsophisticated fraud schemes (such as a one-off straw buyer flip) that defaulted immediately are often detected in this type of review. Indemnification or repurchase requests are likely if the loan was sold with reps and warrants in the contract.

5. Severe loss reviews - Many investors will perform QC or root cause analysis on loans with large losses, even those with a vintage over one year. Egregious frauds and schemes may be detected here, and recourse will be sought from the originator.

6. Fraud investigations - These take place at any time over the life of the loan, and are usually triggered by a tip about a particular loan, loan officer, appraiser or a particular fraud scheme. As the investigation continues, the sample will broaden as related loans are identified. This is where most fraud schemes are fully identified. Again, recourse from the originator will be an outcome if it was purchased with reps and warrants in the contract.

As noted, mortgage origination fraud may have long discovery delays, and different types of fraud are more likely to emerge at different times in the life of a loan. For these reasons by the time a problem has been identified, it may have become very large. To prevent this, predictive analytics are the key to identifying potential fraud earlier in the process either to target prevention efforts, or to measure risk levels and trend changes.

For more information about the predictive analytics efforts of CoreLogic and its consortium-based population of millions of loan applications, and thousands of examples of loans with fraud, visit: http://www.corelogic.com/products/loansafe-fraud-manager.aspx

Next: The Delay in Mortgage Fraud Discovery and What You Can Do About it.

© 2017 CoreLogic, Inc. All rights reserved

Source

https://www.corelogic.com/blog/authors/bridget-berg/2017/09/the-how-what-and-when-of-mortgage-fraud-discovery-6-touchpoints-over-the-life-of-a-loan.aspx

>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical News Post Listing










Make a Comment

Econintersect wants your comments, data and opinion on the articles posted. You can also comment using Facebook directly using he comment block below.




Econintersect Contributors








search_box
Print this page or create a PDF file of this page
Print Friendly and PDF


The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.







Keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government





























 navigate econintersect.com

Blogs

Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2017 Econintersect LLC - all rights reserved