Mortgage fraud is a unique animal because, while it costs lenders millions of dollars, it largely/often goes unreported. Think about it: how many times does something fishy come up on a deal where maybe you opt to pass on the deal, but then don’t call the police and report the applicant? Applications with undisclosed parties on title who aren’t listed on the application, values that are overstated, incorrectly disclosed/undisclosed information in the application, job letters that don’t match up with paystubs and other income documentation – these are all examples that could indicate mortgage fraud.
The tough part is, when there is a suspicious application, often lenders don’t report mortgage fraud to the authorities either unless they have suffered some financial damages.
Look at a recent case reported by the Toronto Sun (view the article in full here: http://www.torontosun.com/2016/12/30/cops-hunt-suspects-in-mortgage-fraud).
A man and woman in the GTA approached a mortgage broker looking for a $200k mortgage. They were looking to refinance. The broker arranged the second mortgage and the couple received the proceeds.
However, it was later discovered that the couple were fraudsters who stole the legitimate homeowner’s identity! In this instance there were financial losses. The fraud was ultimately reported to law enforcement and law enforcement is aggressively looking for the perpetrators – making appeals and prompting releases about the incident in the news.
When something like this happens, not only does the person defrauded and the lender suffer damages, but so do you – to your reputation and relationship with your lender.
In this example, how could you identify that something is awry when the applicant has ID in the homeowner’s name? One way is by uncovering information about the property owner that a fraudster likely wouldn’t know, but the legal homeowner would. Looking at a property report can provide you with valuable information about the property sales history and mortgage history that can enable you to ask pointed questions that only the legal homeowner would know, potentially revealing that someone is attempting to pull a fast one.
It’s nice to see law enforcement bringing public awareness to these stories. The more publicized the incidences are, the more awareness is gained both by the public as well as by agents and brokers. This creates an environment to discuss how to identify and prevent mortgage fraud. It is so important.
For information about how you can validate information provided by applicants in a mortgage application please visit Purview at http://purview.ca/.