■ ■ ■ Fannie Mae— www.fanniemae.com/singlefamily/
■ ■ ■ Freddie Mac— www.freddiemac.com/singlefamily/preventfraud/
■ ■ ■ CLEAR— legal.thomsonreuters.com/en/products/
■ ■ ■ TLO— www.tlo.com/fraud
■ ■ ■ National Student Clearinghouse— studentclearinghouse.org
■ ■ ■ Plaid— plaid.com
■ ■ ■ Yodlee— www.yodlee.com
■ ■ ■ FBI— www.fbi.gov/investigate/white-collar-crime/mortgage-fraud
Integrated Fraud tools:
■ ■ ■ FraudGuard— www.firstam.com/mortgagesolutions/solutions/fraud-verification/ fraudguard.html
■ ■ ■ LoanSafe— www.corelogic.com/products/loansafe-fraud-manager.aspx
■ ■ ■ Telephone Number Lookup— www.fonefinder.net/
www.fonefinder.net to see if the
phone number provided is from
a cell provider.
■ ■ ■ Relationships Between Loan
Parties: If the broker is connected with the applicant or with
anyone else on the chain, that
should be investigated further.
There are many fraud tools available to help a lender determine
those types of connections.
Trust but verify.
Your best defense is to independently validate everything you’re
able to validate. Use technology
where possible. For example, data
vendors like Plaid and Yodlee allow
lenders to integrate directly with
financial institutions to get direct
access to consumer bank statement data (with consumer permission). It’s impossible to manipulate data which comes directly
from the bank.
So you’ve identified fraud, now what?
Speed is of the essence. In some cases (e.g., wire fraud schemes),
if funds get re-routed, getting on the phone with the bank can
allow for the freezing of those accounts until an investigation can
be conducted. Be persistent. Call everyone and anyone to find the
right person. Make noise and be the squeaky wheel. Oftentimes,
these issues impact hundreds of thousands of dollars, and politeness
goes out the window when you’re trying to get those funds back.
If you suspect illegal activity, you should seriously consider engaging law enforcement.
The FBI has agents dedicated to mortgage
fraud. Let the size of the potential fraud
impact determine where you decide to go
from a law enforcement perspective.
I have never seen a loan purchase agreement that didn’t include a representation or warranty on fraud. It would be
extremely unusual if you didn’t have an
obligation to self-report to a downstream
investor. As painful as it might feel, telling
the investor (as opposed to them telling
you) gives you instant credibility and
(hopefully) negotiating leverage when
you try to work out what to do with those
fraudulent loans (e.g., re-purchase vs. indemnification). If your loans were securitized, the stakes might be
even higher (think SEC involvement). Integrity with your investors
is a big deal. If you lie to them or hide information from them,
they’ll lose trust in you and that trust is very hard to get back.
If fraud has infiltrated your organization, find out where your
weak points are. Fix the gaps. This could include changes with
vendors, technology, processes, training, hiring of new staff, etc.
Remediation efforts will likely be a big focal point of your conversations with your downstream investors. Making counterparties
comfortable with your enhanced processes will ensure that they
continue doing business with you.
Ultimately, mortgage fraud is not going anywhere. If anything,
with improvements in technology, the creativity of these fraudsters
will only increase. What will set institutions apart is the effectiveness in how quickly and thoroughly they identify fraud and what
they do with that information once they’ve found it. ■
ABOUT THE AUTHOR
NIMA J. VAHDAT, CRCM, CAMS is the Senior Vice President,
Associate General Counsel and Chief Compliance Officer of Impac
Mortgage Holdings, Inc. Prior to joining Impac, Nima has worked
in banking compliance at organizations including loanDepot
and Discover Financial Services. Nima received his JD from the
University of Michigan and his MBA from California State University,
Fullerton. He resides in Orange County, CA with his beautiful wife,
5 kids, 5 surviving fish, and 1 surviving fiddler crab. Nima can be
reached at email@example.com and (949) 235-9694.
What will set
is the effectiveness
in how quickly and
identify fraud and
what they do
they’ve found it.