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Who is Committing Mortgage Fraud – Your Brokers or Your Applicants?
It has been widely debated what is and what is not considered mortgage fraud, and who the perpetrators of mortgage fraud are. Because mortgage fraud deals with information that is often incorrectly declared or omitted from mortgage applications, this debate runs rampant. The most common incidences of mortgage fraud occur when information is incorrectly declared or omitted from a mortgage application. Sometimes this is because the applicant simply guessed or made estimates with respect to information or estimates. In other instances, these situations occur because bad actors purposefully omit and declare incorrect information on a mortgage application to get a deal funded. It is not uncommon for some of these individuals to work in or have knowledge of the real estate/mortgage industry, which makes them acutely aware of how to go about doing so. On the other hand, more often than not, the problematic information on an application exists simply because people guess what their home is worth or what they own on mortgages and their agents, brokers and even bank employees simply take their word for it.
While inevitably, most omitted or incorrectly declared information will come out following an appraisal or through the real estate lawyer on closing, once a deal gets this far along in the mortgage closing process you, the lender has spent considerable time and resources administering the application.
That’s only one part of the problem. The other is that mortgage fraud largely goes unreported. Why? Because lenders don’t have the time or resources to report each and every instance where a broker or applicant has provided bad information, and in many cases lenders may not even be sure if the bad information was provided intentionally. This is not likely to change.
The best thing that you, as a lender, can do to mitigate mortgage fraud and close more good deals is to do more at the application stage to identify if any information has been omitted or disclosed.
Some key attributes of your application that you should be independently verifying at the point an application is submitted is:
- Who the legal homeowner is
- What mortgages are registered on title
- What is the property worth
- Identifying if there any liens prevalent
Particularly as it relates to checking liens, you may identify issues that may not even appear on the credit bureau. A great example is condo payments. If a client came to you with good credit but then you later learned that they were not making their condo payments on time – would that change their quality as a borrower? Likely so. A lien search is likely to reveal when an applicant is in arrears on condo payments long before the lawyer incurs the expense of ordering a condo certificate.
I think it’s fair to say that if we looked at the literal definition of what mortgage fraud is, all involved could be implied as guilty – the brokers, clients and even your frontline staff. The reality is, it is the steps you take and the technology you leverage that will determine how much of an impact mortgage fraud has on your operation.
At Purview we take mortgage fraud very seriously – both the identification of it as well as the movement to stop it. We have the tools that let you improve your own mortgage fraud identification process.
Visit https://purview.ca/ today for more information.
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