Does Your QC Program Catch Borrower Employment Fraud?
The post-financial crisis environment has supported the mortgage industry’s adoption of the digital era. With the advancement of the Mortgage Industry Standards Maintenance Organization (MISMO) and the Uniform Mortgage Data Program (UMDP), industry stakeholders have gained access to extensive amounts of data, helping to eliminate the reliance on information collected manually during the application process that is frequently wrought with errors and often unverifiable. This evolution has given rise to innovative solutions that access and check data from multiple repositories, significantly advancing decade old processes, improving access to credit, and expanding fraud detection capabilities. However, amidst these advances in access to data there are some notable of gaps. For example, employment and income data certainly doesn’t encompass information from every employer throughout the U.S., creating an opportunity for fraudsters to take hold. When lenders have to verify or reverify employer information manually, or when the lender is predominantly reliant on automated tools, income and employment scams such as “fake employers” are more easily missed.
This year has produced a number of fraud alerts from investors that identify “fake employers” and warn lenders to look for red flags when reviewing income and employment information. Fannie Mae issued two alerts entitled Misrepresentation of Borrower Employment Scheme, one in May and another in July calling out over 30 businesses that appeared on documentation, yet whose existence could not be substantiated.These alerts encourage lenders to use “prudent origination, processing, and underwriting practices (to include) looking for red flags.” These notifications go on to caution that lenders should “verify that the borrower’s place of employment actually exists and obtain supporting documentation.”In response to investor requirements to further verify employment data, or in the absence of automated verification of employment, lenders can find themselves stuck in the antiquated process of manual verification.A process that has proven to be time consuming, costly, error prone and increases exposure to fraud risk.
One of Quality Mortgage Services (QMS) solutions, QC Verify helps to solve this obstacle, providing a secure automated alternative to reverification by mail or phone. QC Verify can also be used in the upfront process to provide verification in those circumstances where your automated solution does not cover certain employers.Leveraging the reputable Mortgage Analysis Review Software (MARS) proprietary platform, QC Verify assists lenders in requesting and receiving a complete verification of employment (VOE) in a manner that protects against fraud, meets cyber security requirements and precludes wrongful access to Personally Identifiable Information (PII).
As margins continue to compress, production costs remain high, and interest rates inch up, the industry needs a cost effective solution to address VOE fraud risk, making QC Verify a welcome alternative to manual intervention. Additionally, your organization gains access to a reputable, experienced partner.QMS is a long-standing industry business that has provided boutique due diligence solutions for the financial services arena since 1992. The QMS product suite has grown from specialization in post-closing audit and quality control, with expertise in pre-funding solutions, to encompass MERS reconciliation, HMDA and AML audits. QMS also offers solutions that satisfy investor and agency funding requirements, meeting VA, FHA, USDA, Fannie Mae and Freddie Mac guidelines.
Take this great opportunity to re-evaluate how your institution manages verifications, as well as pre-funding and audit practices.Visit us at to see how innovation can empower your internal processes.