Reduce Mortgage Fraud Using Technology!

We blog so much on the topic of fraud because it remains a very common challenge facing the mortgage industry as a whole. There are so many different types of fraud and one reason it is so challenging is because, in many instances, fraud is being committed but the individuals don’t even see it. With so many parties to the transaction and hands in the pot, you can see how easy it is for fraud to occur.

·         Real estate agent – perhaps they know something about their client, they are about to be laid off for a month, for example, but because it’s only a month, they see it as harmless so don’t tell the broker.

·         Mortgage Broker – perhaps the value of the client’s home is $230,000 but if beefed up another $10,000 there would be enough equity to cover all their debts – I mean hey, what is $10,000, right?

·         Client – perhaps the client visits a mortgage broker and tells the broker that their parents are loaning them their down payment but in fact they are borrowing it.

·         Appraiser – perhaps when at the house the appraiser is impressed because the homeowner has similar design taste as the appraiser. The client gives the appraiser a huge sales pitch about the house and so the appraiser decides to beef up the value a little bit to help the client out.

Genworth put out a great release recently outlining common types of mortgage fraud - check it out here: http://genworth.ca/en/lenders/types-of-mortgage-fraud.aspx.

Fraud will always exist, so lenders will have to continually seek out measures to combat fraud – and technology has been a great help in this area. Using technology and some good old fashioned investigation you can ensure that you know all there is to know about your application. Here are some tips that you can use to prevent fraud:

Getting Started with Purview: Integrating Purview Into Your Workflow

Whenever you look at ways to integrate new technology into your organization to increase efficiency, it is important to consider how versatile the technology is and how much use you can get out of it. The Purview For Lenders product is one that is commonly known as being a staple in underwriting departments Canada-wide, but Purview is actually used in many different areas within an organization.

In Ontario, Purview For Lenders uses data from the Province of Ontario's Land Registry Information System (POLARIS), which contains the most current and accurate land information available. Data provided from outside of the Province of Ontario is facilitated through agreements with both municipal and city assessment offices and third party providers.

This data is then delivered through a report that reveals:

• Property Sales Information – information about the property’s sales history
• Home Ownership Information
• Registered Mortgages and Liens
• Property Value and Equity Estimate
• Fraud Check and more…

The information is versatile because, within a financial institution, it can be useful in so many different areas.

On the collections and enforcement side, this report can be obtained in an instant online and is far less expensive than an appraisal. It can be used to evaluate a particular client’s property or it can be used to evaluate your entire collection’s portfolio. You can locate clients and also learn of other properties they may own, so if you do power of sale and are in a loss position you may pursue the debt through other assets.

In special adjudication, you can use the AVM to validate the value that a broker or client has submitted in an application and even compare it to the active MLS listing or to active MLS listings.

In risk management, you can leverage the data in Purview to evaluate and value your current portfolio and determine price appreciation year over year. You can also use Purview to determine housing price trends again interest rates.

Private lenders really gain a lot of value from of Purview. Traditionally a product used by major banks, more trust companies, credit unions, MICs and private lenders now take advantage of Purview. Why? For all the same reasons listed above. The beauty though, is that technology and affordability have leveled the playing field, making Purview a product that everyone can take advantage of.

Whether you use Purview now or are thinking about it for the near future, consider all the ways you can use it to maximize its value in each workflow that you integrate it into.

For more about the many valuable uses for an AVM please contact Teranet today by calling 1.855.787.8439.

Mortgage Enforcement Tools and Tips: Lenders Use AVMs to Collect More

We blog a fair amount about automated valuation models (AVMs) and how lenders use them. This is because, while they are widely discussed for being used in the sales, application and credit adjudication stages, AVMs are actually used across many different departments within financial institutions.

AVMs are particularly useful in the area of mortgage collection and enforcement. In collection and enforcement, the more you know about your client and security, the better. Power of sale is not always the best answer and it is better to know enough about the complete picture than to face surprises later.

AVMs help you quickly learn the value of a particular property. While that information is very useful when collecting a debt, some AVM platforms like Purview For Lenders include their AVMs inside a more comprehensive report, so on the collection and enforcement side they are able to:

• Validate addresses
• Validate home ownership information
• View registered mortgages
• View registered liens
• View an estimated property value
• View exterior and aerial imagery and more

Searches can be performed by name or address. Either way you have to know the Land Registry Office that the subject property is located in. If you know the homeowner’s name and not their address, you can still produce a search result.

This is handy to see many different things when you are looking at how you will collect your debt:

• You can use it to locate people who have disappeared – maybe your client owned more than one property.
• You can use it to get an idea regarding the financial positing of a property – maybe after your mortgage your client got subsequent financing.
• You can use it to learn if someone owns a home to enforce a judgement.
• You can use it to estimate equity in a property you have financed that has gone into default – this comes in handy when you are considering instituting a power of sale.
• You can use it to check if a condo has placed a lien on a property or a lien has been placed for unpaid property or income taxes  

Having the answers helps allow you to make some solid decisions about how you are going to go about collecting your money and what role your client’s property will pay in the collection of your debt. This will position you take collection action armed with as much of your client’s true and current financial picture as possible.

For more about the value of an automated valuation model please contact Teranet today by calling 1.855.787.8439.

How is a Property Appraisal Different from an Automated Valuation Model?

In the lending world, a major part of the credit adjudication process is assessing the value of your security. Some lenders use automated valuations, some lenders rely on CMHC’s concurrence with the value stated in the application, and still others will request that an appraisal be performed – whether it be a full appraisal or a drive-by. Some lenders will use all of the above and here is how they are not only different from one another but in many ways complement one another.

AVM + agreement from insurer + appraisal = the most probability that you know what the property you are loaning on is worth. Let’s drill down and take a look at each resource and the nuances.

An automated valuation model, or AVM, is a program which produces a property value derived from mathematical calculations. AVMs are most useful at the application stage because, not only can you validate the property value indicated in the application but you may also learn that the property was not worth the value stated or that it is worth more and an upsell opportunity is present. Because AVMs can generally be produced online they are sometimes pulled multiple times over the course of a mortgage transaction.

If the AVM wasn’t requested at the application stage – it generally will be shortly thereafter as the deal proceeds through the closing process.

If you have requested an AVM and it agrees with the stated value on the application then it is highly likely that the insurer will not dispute the value of the property.

Appraisals involve a certified professional going out to the property, so appraisals can reveal applicants with: properties in very poor condition, undisclosed construction/renovation, rental properties that are listed on the application as principal residences and much, much more. On the flip side, an appraisal can be great for a property that is in excellent condition.

Now, the reason that appraisals complement AVMs is because, while there is some overlap in that both derive a property value, they are very different. An AVM is analytical and based on formulas – it is not swayed by personal opinion, nor does it take into consideration the interior and exterior condition of a property.

So as you can see, while it can seem like the 2 outlined in this blog do the same thing, they actually don’t and leveraging both will see you close more deals and identify more opportunities.

For more about the difference between an AVM and an appraisal please contact Teranet today by calling 1.855.787.8439.