Mortgage App Fraud Alert

As a Security Officer, you may be interested to know that there is another part of your financial institution on the watch, checking for fraud.

The Mortgage Asset Research Institute in Reston, VA incorporated information from over 600,000 loans, compiled into its data base over the last six months. Their conclusion is that seven out of every ten applications that are fraudulent or border on fraud are submitted by mortgage brokers rather than by borrowers.

According to the Institute's report some mortgage brokers deceive lenders by accepting commitments for the same loan from more than one lender. Lenders can commit as much as $1,000 to prepare and lock in a mortgage. The broker may lock in the loan rate and later cancel the commitment. This duplication of processing expenses may be costing the financial industry billions of dollars in fraud each year.Or some brokers may apply in behalf of a single borrower for multiple owner-occupied loans.

In trying to "fix" the system to shut down fraud, mortgage lenders say they must proceed with caution. It is not illegal to "shop" for mortgages. As a matter of fact, financial institutions encourage it. Broker activity, however, may be more closely monitored as lenders move closer to cooperation and information sharing through such entities as the Mortgage Asset Research Institute.

Copyright © 1997 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 7, No. 6, 5/97