Improving Lender Relationships – Catch Fraud Before Your Lender Does

One of the biggest strains that impacts lender/broker relationships is fraud. Fraud in fact is one reason that some lenders don’t even accept mortgage applications at all.

While obviously some forms of fraud are blatant like omitting or falsifying documents or information to obtain mortgage financing for a client – others are not.

Many times lax underwriting procedure within brokerages can lead to fraud deals slipping through the cracks. These points outline types of common fraud and how you can catch it:

·         Income fraud - Review income documentation very closely for the slightest discrepancy. Make a quick phone call to verify employment and the employment information presented.

·         Undisclosed non arms-length transactions - This can be uncovered many ways: Compare names on documents and review the sales history on the property.

·         House not in the name of the applicant or other people on title - While you can ask the client for their deed, it will only be as good as the date provided. To accurately verify home ownership information, ask the client for their ID and then run a search to verify who is on title.

·         Manipulated property values - Generate an AVM to ensure that the stated value is accurate.

The challenge is that once a deal gets to a lender and the lender uncovers fraud or worse a deal goes on the books and fraud is detected post-funding, the relationship between the lender and broker can be severely damaged.

Never mind your closing ratios being impacted by deals that don’t close as a result of fraud, how about the fact that some lenders can completely decide to stop dealing with you?

Mortgage fraud costs the industry as a whole. The cost to a brokerage that becomes known for fraudulent deals is devastating – mortgage fraud can put a brokerage out of business.

Like a car dealer wouldn’t purchase a car without running a vehicle history report on a vehicle purchase, there is tremendous value in making a minimal investment to ensure that you know everything about the property being financed and the person requesting the financing.

Be prepared and protect yourself with these tips and more for mitigating mortgage fraud from Purview For Mortgage Brokers: 1.855.787.8439.