Thank you for following our coverage of the Mortgage Bankers Association's 2009 Fraud Issues Conference. We hope it contributes to your continued success and look forward to providing this service to you again at a future conference.

Integrating automated fraud screen tools requires active participation of the lender’s IT department, experts at the Fraud Issues Conference said today. The lender’s IT department must understand the results the lender is seeking so it can create the systems to deliver them from the vendor. IT must know the results and the reports required in advance. Increasingly, lenders are being urged to go paperless because the risk of fraud is reduced when all documents and verifications are provided electronically. Paper provides for little control over people, process, or legal compliance at the same time it opens doors for fraudsters who can create fake documents and forge signatures. Paperless mortgages are harder to manipulate, they provide information that is manageable, archivable, retrievable, and transferable. More to follow…

Technology must be employed to stop rising incidents of mortgage fraud, according to experts here. Third party verifications, especially when they employ technological automation, are superior in most cases to manual verification of documents. First, employees have not been trained to spot forgeries. Secondly, technology for the verification of employment and income are now inexpensive and provide a high return on investment. Thirdly, technology will always provide the same workflow, whereas manual workflows vary by department, training level and oversight. Human resources are better utilized investigating red flags that technology returns. More to follow…

Attendees at the MBA’s Fraud Issues Conference seemed very interested in understanding why mortgage fraud was on the rise and what, specifically, was causing it. Experts agreed that some of the fraud being perpetrated today was designed to ensure continued business income streams, which is expected to continue. Realtors, brokers, builders and others trying to shore up falling business volume are turning to fraudulent transactions to maintain a standard of living that is no longer possible in many cases. Other reasons include the fact that the shift from subprime, no-doc loans to full-doc loans has left lenders unprepared to deal with new work flows. Underwriters have not been adequately trained to verify the information now being presented on the application. Desperate borrowers and overloaded REO departments are two more causes of increased fraud. More to follow…

Technology is a great boon to mortgage fraudsters, experts at the Fraud Issues Conference said today. Digital manipulation is making is easy to create W-2s, pay stubs, verifications of deposit, canceled checks and fake IDs that look real. Computers are allowing criminals to forge appraisal licenses and identification documents. They then purchase form-filling software to complete their appraisals and start creating falsified documents. A red flag is raised when application is made to cover several investment properties under a single mortgage where all are appraised by the same appraiser. More to follow…

A federal bill now making its way through Congress calls for a federal mortgage fraud task force after 2009. The bill, if signed into law, would set up task forces for the identification and prosecution of mortgage fraud. Responsibility for enforcement would fall to the Department of Justice, which would then provide training to other law enforcement agencies. The new law would help to encourage states to set up their own mortgage fraud task forces. Originally, the bill was part of the stimulus package, but was recently pulled out of that legislation and made part of the bankruptcy mortgage cram down bill as an amendment. That bill is expected to pass. For up-to-date information on all pending industry legislation, visit the MBA’s website at http://www.mortgagebankers.org.

Florida is taking an interesting approach to fraud deterrence that is fostering some support from homeowners. Fraud often inflates the value of properties, which can then affect the assessed values of other homes in the neighborhood and lead to higher property taxes. In Florida, if fraud is detected, the other homes in that neighborhood are re-assessed, which can lead to lower property taxes. That is often enough to get a neighbor to blow the whistle on a fraudster. More to come…