8 Red Flags to Help You Uncover Mortgage Fraud

Mortgage fraud touches even the most seasoned underwriter and is something that lenders have to remain vigilant to mitigate. This blog will provide you some red flags to uncover mortgage fraud.

1. Employment/income verification is difficult to verify. It is always prudent when underwriting to validate the income source. This may include Googling the individual/company or calling to verify income and other measures. If the business has no online presence or is not listed in the telephone directory this can be a sign that fraud is present.

• On this note pay attention to employment letters – are they on letterhead? Are there spelling errors? Does the income on the job letter match the paystub and Notice of Assessment?
• Are the numbers on the paystub or tax assessments rounded off? That is a big flag, but not so much in the case of job letters.
• On bank statements, you can double check deposits and match the amounts indicated on the clients paystubs.

2. Down payments. Where is the money coming from? If from several sources or in cash this is a flag.

3. Void cheques – verify them. You wouldn’t believe how often fraud deals are discovered when a lender goes to debit a payment from the client’s account after closing and then they discover the account doesn’t exist. It’s as a simple as a phone call to the bank to double check the information stated on the cheque.

• Is the void cheque a counter cheque and not personalized?

4. Identification. The applicant doesn’t produce significant ID - or any at all!

5. Meetings. One or more borrowers have not been available for in-person meetings to sign up and have insisted on conducting the signing of different documents by fax or email.

6. Value. Sale prices are significantly higher/lower than stated on the application. This can be quickly checked through an AVM.

7. Title: Who owns the house?  

8. Mortgage balance: You want to make sure that there are no encumbrances or liens so:

• Ensure that the broker has had the applicant sign 3rd party consent form – this will be very important if you need to verify balances.
• Request that the applicant provide a mortgage statement.
• Run a search to validate that there are no undisclosed mortgages or liens.
• If something comes up – request the current balance directly from the lender.

What is important is that you are using the right tools and resources to quickly underwrite your deals. For example – numbers 6-8 can be accomplished by using a tool like Purview which is multi-functional and can do more than one thing.

For more about how to use Purview For Lenders to help identify and avoid mortgage fraud please contact us today by calling 1.855.787.8439.