The most recent CoreLogic Mortgage Fraud Report once again indicated that fraud risk is on the rise.The report cited a 12.4 percent year-over-year rise in their mortgage application fraud risk index, with income fraud risk reported up 22.1 percent as the highest increase in risk found. The next greatest increase was for occupancy fraud risk, which was reported up 3.5 percent.Interestingly, the most significant increase in fraud by loan type was seen in conforming purchase loans with a loan-to-value (LTV) of less than 80 percent.
The report also noted that 1 in every 109 applications from the second quarter of this year showed some indication of fraud. “Because home prices are rising, and demand is strong, most mortgage fraud in this type of market is motivated by bona fide borrowers trying to qualify for a mortgage,” said Bridget Berg, CoreLogic’s Principal of Fraud Solutions Strategy. Specifically calling out false credit disputes and income misrepresentation, Ms. Berg’s recap of the report pointed to fraud schemes such as applicant/borrower claims to be victims of identity theft.This can be particularly treacherous when the removed trade line is for a foreclosure, which could subsequently result in non-purchase by the investor, or repurchase.
The examples of income fraud issues were in line with Fannie Mae’s most recent fraud alert on the Misrepresentation of Borrower Employment Scheme, also described in our recent blog on borrower employment fraud.The key differentiator being that CoreLogic has found evidence of this scheme across the country, whereas the Fannie Mae alert is primarily focused on California.An additional variation reported on the income fraud scheme involves borrower falsification of both employment and income information, whereby the applicant states they’ve been employed for less than one year and therefore supporting data cannot be verified with an IRS 4506-T.
Although there continue to be conflicting reports on what’s next for the housing industry, with the possibility of rising interest rates, continuing restrictions on the credit box, and volatility in new construction starts, the bottom line is that the consumer demand for housing remains high and that opens a door for fraudsters. This also illustrates the ongoing need for an experienced QC partner.Having access to partner expertise to help your organization identify not only current regulatory requirements, but to call out the nuances of loan documentation and data indicating fraud risk is invaluable.
Quality Mortgage Services (QMS) delivers this experience as well as innovation. With exclusive solutions such as, QC Verify, and ATQ (Audit the QC), QMS is ready to help solve industry obstacles as they arise, providing a secure automated alternative to tedious and costly inhouse due diligence processes.Leveraging the sophisticated Mortgage Analysis Review Software (MARS) proprietary platform, your institution gains access to an intuitive web-based QC and audit solution.Let MARS and the QMS team show you how to Improve your capacity to identify red flags and fraud trends as an inherent aspect of your QC program.
QMS is a long-standing industry provider of boutique due diligence solutions that are customizable for your institution’s unique needs.Serving the financial services arena for over two decades, the QMS product suite has grown its specialization in post-closing audit and quality control to include pre-funding solutions, 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 quality control, as well as incorporating fraud and risk best practices.Visit us at www.qcmortgage.com to see how innovation can empower your internal processes.