Lenders need to prevent mortgage fraud, but this complex issue has the potential to distract from their primary business focus: making loans. Mortgage fraud prevention has many moving parts. Using a dedicated solution like Secure Insight’s mortgage fraud prevention platform helps lenders stay focused on their core business.
What does it look like for lenders to handle fraud prevention themselves? Here are things you’ll need to do: subscribe to various online services, develop an internal process to review and evaluate the data, and train people to understand how this process works and what does—and doesn’t—create a risk. After you’ve got all that in place, you need to do constant monitoring.
While a lot of companies might be able to put in place a process to do an initial check, regulators require ongoing review and monitoring because they recognize that relationships change over time. But ongoing monitoring is difficult because new cases keep on coming, so there’s little time to continue vetting everything properly if you’re trying to focus on running a business.
Another big hindrance is the quality of the data. Lenders get information when loan processors and underwriters enter it into their loan origination system (LOS). But it’s very easy for the data not to match up for simple reasons. If one processor enters “John Doe and Company,” another puts in “John Doe,” and another puts in “JD & Company,” there’s an obvious problem. Lenders need to be able to ensure that all the data they’re dealing with is unified, which means taking the time to verify it all.
Fraud risk rises when the monitoring system has inefficiencies and mistakes, and there are a lot of analytics that businesses are not trained to do properly. Unless a lender is able to hire 15 former attorneys to build out an internal fraud-prevention system, chances are that doing this in-house is going to be too difficult. The average mortgage lender making 2,500 to 5,000 loans a month does not have the resources, trained staff, or tools to manage fraud prevention efficiently.
If you have your own process in place, remember that regulators expect that you test yourself. It’s not enough for you to say, “We have a process.” Who’s testing your process to make sure you’re getting it right?
One of Secure Insight’s strengths is giving you this assurance. We can check every 10th transaction, or 20% of your closed loan files, so that if an auditor comes in you can say that you test your work against a verified database.
The mortgage industry is kind of like the Wild West, as compared to banking, which lenders generally perceive to be buttoned-up and traditional. Mortgage lenders think of bankers as all wearing identical three-piece suits while mortgage lenders are apt to do things their own way.
Many mortgage lending companies are owned and managed by salespeople who became successful and decided to give lending a try. They have a sales mentality, looking for ways to close as many loans as possible as profitably as possible. Many of these folks are skeptical of voluntarily instituting anything that’s going to slow down the process. And they’ll be inclined to do whatever’s necessary themselves instead of hiring someone if they can save money that way.
Some may even proactively decide to take the risk of being audited. They save money until they get audited, at which point they turn to a different process.
Under the Obama Administration, the Consumer Financial Protection Bureau (CFPB) was very aggressive with consent orders and audits and investigations, in part because they were orchestrating their efforts with state regulators. Back then, people had more of an incentive not to take risks because they saw big fines and penalties. Some lenders may think that the Trump administration has taken its foot off the accelerator a little bit. But the CFPB recently announced a huge investigation of Rocket Mortgage, a company of Quicken Loans, for potential violations of the Real Estate Settlement Procedures Act (RESPA).
Mortgage lenders should take that as a sign that they need to be vigilant, even now. And at Secure Insight, we know that in order for you to take on this level of oversight, you need to feel that the solution is easy, inexpensive, meets the regulatory demands, and is not going to muck up your process.
Working with Secure Insight checks all of those boxes.