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How does your team combat present-day mortgage fraud?

Mortgage fraudsters love a busy origination season, and the past two years have delivered on this front. As your staff is diligently processing, underwriting and closing record numbers of mortgage loans, fraudsters are preying on the fact that your team may be too busy to catch them at their game. Tapping into gaps created by remote workforces and leveraging the latest digital improvements, these scammers are constructing bogus documentation that has become increasingly more difficult to identify. On top of this there has been a resurgence in employment verification fraud, as both job and income loss have increased during the pandemic.

With mortgage fraud on the rise and industry fraud solutions aging in place, it is crucial that operations are up to speed on current fraud trends, in addition to the use of modern fraud detection measures. Deciphering internal trends in errors, misrepresentation, deception and/or fraudulent activity, necessitates comprehensive review and a sophisticated eye for detail. Today’s industry fraudsters are no joke. Despite advancements in fraud detection, these cunning tricksters have taken age-old schemes to an entirely new level. Using the seemingly limitless access to date and technology via the internet, these swindlers readily create fraudulent bank statements, paystubs, gift checks, gift letters, lease agreements and more. There are few limits to the lengths fraudsters will go to falsify income and employment documentation, with occupancy and liability documentation fraud falling closely behind.

Where does the industry see the most mortgage fraud?

Fannie Mae periodically publishes trends that they see through lender self-reporting, internal investigative efforts, consumer reporting, and various areas of law enforcement. Their financial crimes team utilizes data and investigative research to assess fraudulent activity and trends in the mortgage space. The most recent publication, Mortgage Fraud Tip Trends, covers their investigative findings from Q3 of 2019 through Q2 of this year, which ranked the pervasiveness of fraud as follows: #1 Income Fraud, #2 Employment Fraud, and #3 Occupancy Fraud, followed closely by #4 Liabilities Fraud.

Hot Issues – Specific areas where fraud is perpetrated

Quality Mortgage Services (QMS), a long-time provider of sophisticated quality control and audit technology solutions, has also seen a growing volume of misrepresentation and fraud. Offering advanced audit techniques designed to help clients in the early identification of fraud and related trends, QMS has noted several specific areas where the evidence of fraud is more widespread.

  • Asset Statements – As the economic impact of the pandemic has risen, so has the prevalence of fraudulent asset statements used to bolster available funds..

  • Income Documentation – Paystubs and W-2s generated by Independent novelty printers have become extremely commonplace as a means for misrepresenting borrower income.

  • 4506C Data – A common trick seen more and more recently is the provision of erroneous 4506C information, which significantly delays response times and can lead to closing without valid income if prudent measures aren’t’ practiced.

  • Employment Inconsistencies – Borrower employment data is more frequently manipulated to reflect pay that is not commensurate with the employment position, or the employment role doesn’t make sense for the pay structure and/or amount.

Now more than ever…. Don’t overlook the details!

At the end of the day the most important elements to consider during file and document review are the details…. Look for the inconsistencies in dates, fonts, borrower name, addresses, pay dates, and the list goes on. This is essential to the successful identification and prevention of mortgage fraud and misrepresentation. Fraud that will continue to increase as interest rates and housing inventory remain historically low, therefore fueling both origination volume and fraudulent activity.

So, what do we do? Our pledge is to reach out and communicate until we are confident your data is accurate. This heightened level of communication often sorts out the honest mistakes from the fraudulent misrepresentation. Our favorite question? Would you mind putting that in writing? Extra communication, persistence and challenging vague or inconsistent information and data helps garner accuracy. We also triple-check our findings by using multiple sources for information verification.

Our main goal is to help our clients stay ahead of industry obstacles and complexity. We design quality control and audit processes that help clients focus on what they do best, provide homeownership and value to homeowners. Additionally, QMS meets you where your needs are most crucial – If you have an established QC team and simply want to meet investor compliance requirements, then we are here. Conversely, if you want to ensure every precaution has been taken to ensure compliance and fraud avoidance measures are achieved, then we have a plan that meets this need as well. QMS is a proven industry provider that deliver boutique QC and audit services with modern technology solutions. Contact us today at and find out how our team can help you minimize errors, misrepresentation and fraud.

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