Evaluating Your Portfolio in an Uncertain Market – An eBook for Lenders of All Sizes
Are You Ready for Fraud Prevention Month?
March 2017 will kick off Canada’s annual Fraud Prevention Month. During the month, everyone from banks to government to law enforcement will release useful information to aid in preventing fraud. Fraud costs consumers and financial institutions billions of dollars annually. In fact, last year there was an article released by CBC news that tagged the top 6 consumer fraud scams as being responsible for 1.6 billion dollars in financial losses. Check it out here: http://www.cbc.ca/news/canada/british-columbia/canada-s-top-10-scams-earned-crooks-1-2b-last-year-says-bbb-1.3471279.
In the spirit of fraud prevention month, we are taking a minute to look at some key factors you should be paying attention to when it comes to preventing real estate and mortgage fraud.
Identifying mortgage and real estate fraud means looking for suspicious activity in applications during the underwriting process. What could be perceived as suspicious?
- Price consistency – Has there been a big jump in the property’s value? Was the property recently sold for much less than the value stated on your application? Is the price consistent when compared against other similar properties in the area?
- Past transactions – Was the last transaction on the property a cash sale? Perhaps the property has changed hands a number of times in a short period of time.
- Property ownership – Is the property owned by a corporation? Were past owners related somehow (non-arms’ length transactions)? Is the owner or past owner a lawyer on a previous real estate transaction on the property?
- Registered mortgages – Were mortgages discharged soon after a property changed hands? Who holds the current mortgage?
- Previous enforcement action – Has the property been under Power of Sale or Foreclosure in the past?
Does the presence of any of the above mean a fraud is taking place? Not necessarily, but identifying suspicious behaviour enables you to go back to your broker or customer to dig deeper. This could be mean asking more questions or perhaps investigating the application a little bit further.
You can prevent real estate and mortgage fraud simply by putting controls and measures in place to flag suspicious activity. This could be as simple as a checklist coupled with technology that enables your underwriters to validate the questions or items listed in your checklist. It’s no longer as simple as requesting documentation to support the information included in a mortgage application. Independently verifying information is inexpensive and can result in huge overall operational savings by catching these deals sooner in the underwriting process and preventing them from ending up on the books altogether.
For more information on preventing mortgage and real estate fraud or for information about tools that you can use to verify information on your applications to mitigate fraud please visit Purview today at https://purview.ca/.
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