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FEATURE ORIGINATION Fraud Alert! What the rise in online lending means for mortgage-related deceit. by Bob Calandra I perpetrators have proven resilient, creative, adaptable, and sophisticated. pervasive is borne out in the Federal Bureau of Investigation's Suspicious Activity Reports. Between 2010 and 2011 (the latest year available), the FBI received 93,000 cases of suspected mort- gage fraud reported by federally insured financial institutions, according to the LexisNexis 14th Annual Mortgage Fraud Report. That is almost a 33 percent in- crease over the previous year. As sobering as that figure is, That mortgage fraud remains f you thought that today's more rigorous requirements to qualify for a residential mortgage would wrestle fraud into submission, you were mistaken. Fraud individuals can access informa- tion on the Internet from a multitude of data sources has an impact, no doubt, on the amount of fraud," says Phil Huff, CEO of Platinum Data Solutions, an Aliso Viejo, California, company that provides collateral valuation and risk assessment technology to mortgage lenders. Yet, Huff and others say that "The relative ease with which it doesn't include SARs from in- dependent mortgage brokers and lenders. Now add into the mix a wildcard: fraud's latest vehicle, the Internet. With its limitless sources of information, lack of oversight, and an ever-expanding number of homebuyers applying for mortgages online, the Internet is a veritable Petri dish for new, exotic forms of real world and cyber mortgage fraud. involved significant security routines that are resident in most Internet-based programs and operations," says Bill Garland, EVP at Decision Ready mortgage companies doing busi- ness online have access to the same key information as those committing fraud. Countering fraud means lenders must ana- lyze and use that data intelli- gently while employing the latest technology. "Most programs I have seen Solutions, which provides technology to ensure policy and process compliance to lenders. "Real-time, online informa- tion available to an applicant provides transparency into the status of the application and would signal any irregularity." But Tim Coyle, head of commit fraud. It really arms them with how to do it." Fraud: Real and Cyber LexisNexis Risk Solutions' mort- gage and real estate group, isn't as sanguine in his assessment of the risks of online mortgage fraud. While he's concerned about old- fashioned mortgage hoaxes going cyber, it is the Internet's ability to reach and teach untold scores of people how to commit fraud that really worries him. "There are all these sites out there now that will help people [commit fraud]," Coyle says. "In general, as much good informa- tion as the Internet provides, it provides these criminal entre- preneurs enough information to N mortgage fraud each year. In its Mortgage Fraud Report 2010, the closest the FBI comes to a solid figure is to cite a CoreLogic report. The company, which provides data and analysis to the financial companies and the real estate market, estimated that $10 billion in loans originated with fraudulent application data in 2010. Teasing out how much of that o one really knows the amount of money lost to loss came from Internet mortgage fraud is all but impossible. What the FBI and CoreLogic can say is that today's brick-and-mortar mortgage fraud is rooted partly in foreclosures and rescue sales. But "There are all these sites out there now that will help people [commit fraud]. In general, as much good information as the Internet provides, it provides these criminal entrepreneurs enough information to commit fraud. It really arms them with how to do it." —Tim Coyle, LexisNexis Risk Solutions THE M REPORT | 43 ORIGINATION SERVICING ANALYTICS SECONDARY MARKET