Within a few years, mortgage fraud is continuing to grow in a major concern in the us. In 2008, The government Bureau of Investigation (FBI) reported that 63,713 mortgage fraud reports were filed and more than $1 million was invested in investigations of which cases. With a lot more 1,333 percent since 2002, mortgage fraud has developed into a serious risk for banks and other banking institutions in the united states.
The rise in mortgage fraud may be primarily contributed to through the downturn from the U.S. economy in the last year. In the event the U.S. stock exchange suffered big losses in 2008, there is a dramatic surge in unemployment, a spike in foreclosures and defaults inside home mortgage industry and the continued contracting of economic markets, causing credit to diminish to finance institutions, businesses and homeowners. These combined factors have pressured those participating in every in the lending process to conduct schemes to help maintain or enhance their current total well being, causing mortgage fraud to proliferate.
Traditional and emerging schemes have the possibility to multiply across jurisdictions as foreclosures increase, the market industry contracts, entry to credit diminishes plus more homeowners can't seem to sell or refinance their homes. Scam artists, by way of example, have targeted everyone who is either struggling in order to meet their mortgage commitments or anxious to sell their houses. Fraud schemes may also be being conducted by industry professionals who come in a posture to take advantage of the depressed housing market. These schemes negatively impact neighborhoods across the country, federally insured mortgage programs, the mortgage, banking, and securities industries; secondary market investors, tax payers, homeowners and also the overall U.S. economy.
Mortgage fraud is anticipated to continue to hinder a and also the economy in long term, using the quantities of cases expected to rise considerably. Therefore, loan companies in the U.S. must take action to lessen potential risk of mortgage fraud. The simplest way to protect the institution, its assets, its employees and its particular clients is good for banks to implement an audio exercise program addressing mortgage fraud prevention.
Preventing Mortgage Fraud With Training Using the recent boost in the sale and buy of property and more consumers viewing real estate market so that you can produce a fast and profitable roi, preventing and detecting mortgage fraud has become more essential than in the past. As a result of enormous competition along with the chance to make large bonuses from overages and fees, fraudulent loans are made everyday, costing lenders millions. In order to protect customers and assets, banks must equip their employees with all the info about mortgage fraud.
Training will teach employees to get acquainted with common schemes for instance: Property Flipping; Silent Second; Nominee Loans/Straw Buyers; Fictitious/Stolen Identity; Inflated Appraisals; Foreclosure Schemes; Equity Skimming and Air Loans, among others. In reply to tighter lending practices, employees must also stay up-to-date on any new, emerging schemes such as reverse mortgage fraud, credit enhancements, condo conversion, loan modifications and pump-and-pay.
To stop mortgage fraud from occurring, it is crucial that employees know what to watch out for when these types of schemes are perpetrated. Through training, employees will become familiar with the various types of fraud employed in todays mortgage industry and how to combat them. The bank can decrease lending risk by making certain employees are trained for the following areas of mortgage fraud prevention.
Identification Additionally, training will teach employees how to identify likely mortgage fraud perpetrators. Employees ought to know their clients and learn to spot individuals most often involved with these schemes for example lenders, lenders, appraisers, underwriters, accountants, real estate professionals, settlement attorneys, land developers, investors, builders, bank account representatives, trust account representatives, investment banks, and credit ratings agencies which has a criminal activity that is relatively low-risk with high-yield returns. As well as these traditional industry conspirators, there have also been instances involving various organized criminal groups and gang members engaged in mortgage fraud activity.
Detection Employees can help to identify fraudulent lending by finding out how to detect warning signs of mortgage fraud and mortgage fraud hot spots. By knowing where and when mortgage fraud is likely to occur, employees can lessen the risk of mortgage fraud by preventing it before it occurs. Through training, lenders will discover learn how to carefully review all documentation to find any misleading, missing or false information, and other potential warning flags. Training will teach employees how to spot any wrong information about home mortgage documentations, credit report, social security numbers, paystubs, W-2 Forms, Taxation statements, Verification of Deposits (VODs), checks, appraisals, as well as other additional documents linked to the lending process.
Accurate Reporting A bank can also reduce mortgage fraud risk by training its employees around the proper bank policy and process of reporting mortgage fraud. It is crucial for bank employees to be aware of that they are in the best position to assist the institution and its particular customers from becoming victims of mortgage fraud. Employees who understand the correct process of reporting such activity can become more empowered to help you protect the clientele as well as their bank.
Employees should also be well-versed inside the banks information security standards and procedures to safeguard against unauthorized access or using consumers confidential information and records. It is important for employees to learn the Gramm-Leach-Bliley-Act (GLBA) as well as the Fair-Credit Reporting Act (FCRA), which regulates if the Bank may disclose nonpublic, confidential customer information and allows customers to prevent the sharing of certain information with affiliated banks and companies.
When mortgage fraud does occur, employees ought to know to report it immediately. By reporting any suspicious activity on their supervisors, employees will help to greatly reduce the potential risk of mortgage fraud. Though not nesessary by Bank Secrecy Act (BSA), lenders may file a Suspicious Activity Report (SAR) with all the Financial Crimes Enforcement Network (FinCEN) if and when they suspect suspicious activity. To prevent risk, it's good for banks to train their employees on how to file a SAR as part of the reporting process.
Final Word The steady development of mortgage fraud during the last several years requires financial institutions to do this in order to reduce the risk of such schemes. The most effective way to get a bank to shield itself, its employees and it is clients is actually educating its staff concerning how to prevent mortgage fraud before it happens. By learning how to identify mortgage fraud, detect mortgage fraud and properly report mortgage fraud in the event it lets you do occur, finance institutions will help slow up the risk of fraud and decrease the amount of individuals and organizations affected by this crime each year.
