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Let's look at some of the "red flag" issues that might indicate mortgage fraud may be happening. Keep in mind that below is not a complete or detailed list. More information can be found on both government sites or by completing the online Mortgage Fraud course. And please also be aware...
Not every red flag contains fraud!
Our industry is full of talented, ethical, and professional individuals who would never stoop to committing fraud. So don't go on a witch hunt. Every individual you encounter does not intend to commit fraud.
Every file you review will not contain fraudulent documents.
The purpose of introducing these red flags is to help you become more alert to the widespread threat. Don't become paranoid. But don't let fraud and the people who commit fraud infect your organization with a lack of trust.
We will consider areas from which fraud may or may not originate under four categories:
There are a number of red flags to look for in the loan package or the buyer's information.
The list that follows is not complete, but it is a start. Any or all of these items can point to fraud. You might find it helpful to print these red flag lists and post them prominently in the office. It is also a good idea to share these lists with those employees who are involved in any transaction.
HELPFUL HINT:If you make all borrowers sign a 4506-T at the loan application and inform them that your company will check the income information if the file is chosen for pre-funding quality control, a fraud most likely will not complete the transaction as is with you. This may help to deter some fraud before it starts. It may also help to prevent soft fraud by forcing a would-be-fraud to tell the truth about a particular issue in order to qualify to purchase the new home.
Red Flags for Employment
Red Flags for Self-Employed Borrowers
Social Security Number Identity Theft or Fraud
While few future homeowners would dare use their social security number for more than tax or identification purposes, to the mortgage marauders, the social security number is one of the main tools in their tool box.
Signs someone may be using a false or invalid social security number to help them commit fraud:
The Property as the Key to Fraud
The final category to consider for fraudulent activity is the information describing the property. In the real estate business and the mortgage loan business, the property is central to the transaction. There is significant opportunity to introduce fraudulent information and documents regarding the property itself.
These are just a few of the areas where fraud can be detected. Next week we will discuss some prevention techniques for borrowers.