November 2012

TheMReport — News and strategies for the evolving mortgage marketplace.

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Page 45 of 79

FEATURE ORIGINATION Today there are mortgage fraud's current hotspot is collusion in short sales. "We're seeing collusion on the websites dedicated to teaching people how to make their property look like it rise and it has been since 2007," Coyle says. "And a big piece of that are the short sales going on. People are short selling a $450,000 house for $250,000 to their sister or another related party. People are stealing from the lenders." What he finds most amazing is worth less through "reverse staging." about the collusion is the number of Internet sites that explain in great detail how to cosmetically devalue a property without doing serious damage. In the pre-Inter- net days, Coyle says, an owner would try lowering a property's value by not weeding or mowing the lawn. Some people would go so far as to remove an appliance or two. "Pulling out a dishwasher looks horrible, but it's only $300 to put in a new dishwasher," he says. Today there are websites dedicated to teaching people how to make their property look like it is worth less through "reverse staging." Google those words and you'll get an education about how to cosmetically ruin your property's value. Coyle has found websites that instruct people on how to paint a faux crack on a wall or pour water in the base- ment to make it look like there is water damage. "You go down to the base- ment and see water damage and instantly you're concerned about where the water is coming from," he says. "Now you're worried about mold. But when I heard about painting the faux crack on the wall, I thought, 'You have to be kidding me.' These are big-ticket items to fix (if they were real). It's very, very creative. That's really what we're seeing right now." executing a mortgage online is the person with whom they are deal- ing. The lender's loan office never meets the person face-to-face. "My biggest concern about What lenders don't see when ly who they are dealing with, an online lender must also beware of the authenticity of the documents submitted to support a loan request. Fulmer says today's fake documents are very good and can be difficult to discern from the online lending, and I don't care what the security procedures are, is that you don't know who you are dealing with," says Ann Fulmer, a mortgage fraud expert and VP of industry relations at Interthinx. "The less actual per- sonal transactions you have, the more at risk you are to people who are imposters and perpetra- tors. I think there are some seri- ous vulnerabilities there." Aside from not knowing exact- "The less actual personal transactions you have, the more at risk you are to people who are imposters and perpetrators. I think there are some serious vulnerabilities there." —Ann Fulmer, Interthinx 44 | THE M REPORT nology comes in," says Fulmer, who has a proof of funds letter that says she has enough in the bank to buy the FBI building in Washington, D.C. "You can see beyond the picture-perfect fabri- cation of the document to get the story that it is telling about the borrower and whether or not the story is true." Technology: Good and Bad I Internet to find and close a home mortgage loan. As those numbers continue increasing, so too will the opportunity for mortgage fraud to flourish. So what can banks and mortgage brokers do to protect their interests? The an- swer is a multilayered approach that includes technology, hard work, and vigilance. "By employing the same best t seems inevitable that more and more people will use the practices as their brick-and-mortar brethren, Internet companies real McCoy. And they are easily attainable on—you guessed it—the Internet. "That is one area where tech- can help fight fraud," says Huff. "Obviously, additional attention must be paid to the technol- ogy portion of their operation, employing up-to-date firewalls, protection policies, intrusion de- tection, and password strength." Indeed, technology can help lenders by highlighting variances between what is being reported by the borrower's documentation and the information garnered from independent public records and proprietary data sources. But it also helps to roll up your sleeves and dig into the paper- work. "I think the answer is to do your due diligence including hav- ing an underwriter look at docu- ments and ask if it makes sense," Fulmer says. One last way to help stem on- business of selling leads," Coyle says. "Who is credentialing the leads? Nobody. That should be a concern. Let's stop it when it's a $50 problem, not a $500,000 problem." line mortgage fraud, Coyle says, is to scrutinize the leads coming from third-party vendors. "These are companies in the SECONDARY MARKET ANALYTICS SERVICING ORIGINATION

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