The mortgage industry needs to strengthen pre-funding controls by training loan officers – as well as processors, underwriters, the closing departments and a host of collateral employees who likewise have their fingers on the process – how to better detect fraudulent loan applications and real estate transactions. There are many prefunding internet tools, but a very large void in training the staff on how to properly read and interpret the reports, once again one loan at a time.
One of the most difficult aspects of dealing with mortgage fraud is that it is hard to know the scope of the problem. The human element that is involved makes would-be fraudsters hard to spot, and those already committing fraud even harder to identify. Because these people are white-collar criminals, they look, dress, act, and talk just like the rest of us. They won’t look like criminals; they’ll look like loan officers, real estate agents, members of management and loan processors or closers and, of course, the people next door.
Once a white-collar criminal gets away with it, the process quickly becomes addictive. Success breeds more success, and before long such crafters of fraudulent mortgage loans clearly begin feeling that not only are they above the law but in fact, they are not doing anything wrong in the first place.
The Internet and new technology has been one significant reason for the rise in mortgage fraud. The tools that such criminals use are as simple as they are effective: a computer, the internet, printers, design software, a little ingenuity, and an unscrupulous individual can have fraudulent loan documents in no time.
The implication here is clear: our industry has to implement new training techniques for the people just starting out in the real estate industry as it starts to grow again in 2009. Sadly, however, we seem to be still being using age-old training methods even though we have new systems and technology to stem the tide – while the Mortgage Marauders are always use the latest technology and techniques.
We will not be able to change the industry overnight; it will take time, training, and talent to stem the growing tide of mortgage fraud. We will have to learn and grow, not only professionally but personally as well. However, those of us who take our profession seriously, who are in this business to help sincere, hardworking, law-abiding citizens obtain housing in a fair market for a mortgage that works for them can think of little worse than those who prey on the innocent, the righteous, the unsophisticated, and the trusting.
Let us not go on a witch-hunt here and as by no means am I implying that every individual you run across intends to commit fraud, nor is every industry professional you encounter likely to be a fraudster. As you and I both know, our industry is full of talented, ethical, and professional individuals who would never stoop to such a level.
Protecting consumer information is not only good business practice, it is also the law. Thus, the homeowner is unwittingly the first to allow for fraud, and the last to know about it. We know that fraud exists, we know who most likely perpetrates it, and in fact the various ways in which they commit fraud.
The consumer and the potential new homeowner are affected as we have seen the last year or so. The homeowners pay for the cost of mortgage fraud through increased rates and fees and sometimes through higher property taxes because of inflated appraisals. We must combat this blight, and residents in communities across the country are seeing their neighborhoods devastated because of fraud.” These significant costs are just the local after effects. What about the bigger picture? How about the national level?
Many of the quotes I have use for statistics have come from government officials, be they FBI agents or department heads. You know when the government gets involved in a problem, not only is it big but costly. Someone has to pay those agents to track down fraud, someone has to pay to prosecute all those fraudsters, and if convicted someone has to pay to feed, clothe, and shelter them.
Who? Who will bear the brunt of these costs? Same answer as before: You, me, and thousands of unwitting homeowners who would never in a million years think of committing real estate fraud.
There is no doubt that homeowners pay the price of mortgage fraud. The only way such costs can be avoided is to eliminate, or greatly reduce, the problem. That means you, me, and thousands of unwitting homeowners who would never in a million years think of committing real estate fraud are going to have to start thinking about it, and thinking about it soon.
The faster we can all help prevent mortgage fraud, the sooner all of these costs could be reduced, thus saving homeowners and taxpayers money…
Michael S. Richardson
Director/Mortgage Fraud Services