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TH E M R EP O RT | 39 O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST ORIGINATION Mortgage Fraud Risk Is on the Rise Exploring the factors that lead to increased mortgage fraud in some regions. F lorida continues to be a high-risk state for mort- gage fraud according to the latest data from CoreLog- ic's quarterly analysis of mortgage fraud risks across the country. The CoreLogic National Mortgage Application Fraud Risk Index held steady for the fourth quarter of 2018 at 151 compared to the previous quarter. However, the index rose 10 percent compared to the same period in 2017. The report said that while purchase applications accounted for 72 percent of all transactions in the last three quarters, origination volumes continued to decrease due to higher interest rates and seasonality in the fourth quarter. Among the core-based statisti- cal areas (CBSAs) covered by the report, eight of the 10 highest-risk cities were in Florida. The report noted that Miami especially had shown a "notable increase of 29 percent" in mortgage fraud risk during the quarter. The city has topped the list for three consecutive quarters. The New York-Newark-Jersey City area and Los Angeles were the only other CBSAs among the 10 most at-risk cities from mortgage fraud. The report indicated that one of the factors that were influencing the rising mortgage fraud risk was the increase in loan application activity in "areas with relatively high delinquency." It said that such areas could be "more prone to mortgage fraud schemes such as illegal flips, bailouts, and straw buyers." Looking at Miami specifically, the reported said that the city was showing a trend towards higher levels of purchase transactions "with layered risk factors such as LLC sellers, flips, unusual levels of property appreciation, and occupancy red flags." In some instances, the properties were being sold multiple times for cash between nonindividuals with sig- nificant price increases each time before being sold to an individual and financed, the report said. Cape Coral, Lakeland, Orlando, Tampa, North Port, and Jacksonville, were the other cities that were at a high-risk from mortgage fraud in the Sunshine State. Shifts in Digital Closings How are digital closings changing the mortgage market? By Charlotte Brown T he real estate industry has been talking about fully digital closings for years. Many believe it's a neces- sity to satisfy the evolving demands and expectations of today's clients. People now shop online for loans and may have a hybrid live/digital closing, in which some parts of the transaction are digital but, in most cases, documents are still signed with a physical pen in front of an in-person notary. There have been numerous ob- stacles blocking progress towards a full digital closing, including disparate systems across parts of the closing that could not inte- grate, industry readiness, and a wide variety of once well-crafted regulations that now under-repre- sent what modern technology can support and serve. For real estate professionals, it can be confusing to change exist- ing, older processes that have been relied on for years, no matter how much frustration they continue to cause. However, consumer expectations and technical literacy are driving change, and it's key that professionals prepare for the shift. The industry will quickly go from the change to digital closings being an option to it being a necessity to remain competitive. Technology innovation that would enable a fully digital clos- ing is accelerating unlike any time in the past few decades. The regulations that would allow fully digital closings are not all there yet, but there are many aspects of the closing process that are ready to go online. Even in states where pen and ink are still required, for instance, it is not too soon to prepare for the inevitable shift to how closings will work in the not so distant future. There are two key things that you can do today to prepare: Evaluate the software you use: This is one of the most important decisions that you as a lender or title agent can make for your busi- ness. Your software should increase business opportunity, decrease roadblocks and communication inefficiencies, and prepare your company for fully digital closings. Work with title companies that are forward thinking: You need to be able to place orders quickly with your title company and efficiently collaborate. You want the capability to send an approved loan application to your title com- pany without having to make any phone calls. While the technology is imperative, it is equally impor- tant to work with a title company that maintains a commitment to premier customer experience. Our current reality is a hybrid electronic and physical closing world, but we are quickly mov- ing toward an electronic one. Consumer technology is leading the change, and more companies are realizing this and making the in- vestment in better client experiences through technology. Taking this step will not only prepare you for the future but is now necessary for sustainable success. While fully digital closings are going to happen at some point in the future, the changes you make to your business today can help you both be prepared for that change as well as improve the cus- tomer experience along the way. As the head of product expansion and compliance for Qualia, Charlotte Brown is responsible for regionalizing the com- pany's title and closing software platform nationwide for various regulatory and practice environments. During the past year, Brown has led efforts to expand Qualia's service offering from three states to nationwide, across more than half a dozen underwriters. She has built a team that has helped accelerate her efforts to add thousands of region-specific docu- ments and has been pivotal in enabling Qualia to support title companies working on anywhere from two to 2,000 closings per month.