Fortunately, proficient risk management procedures and effective technology solutions can assist financial institutions and creditors with Identity Risk Management (IRM) and mortgage fraud. Using IRM solutions to help identify risk before the loan processing stages, lenders can improve their quality control processes and reduce redundant application reviews. As a bonus, certain compliance tasks, such as those associated with the ID Theft Red Flags rules, can also be automated using the same technology. Mortgage fraud is a vast and growing problem, grabbing headlines nearly every day. Yet it can be difficult to visualize just how pervasive and costly it has become:
- The Federal Bureau of Investigation (FBI) is investigating more than 1,200 mortgage fraud cases, representing a 50 percent increase over 2006.1
- Approximately half of the mortgage fraud cases under investigation report losses exceeding $1 million, and a number exceed $10 million.2
- During 2008, federally regulated lenders are expected to file more than 60,000 mortgage-related suspicious activity reports (SARs), with roughly 15,000 SARs already filed in the first quarter.3
- Losses from mortgage fraud could reach $2.5 billion in 2008, and comparable losses expected for each of the next few years.4 The number of SARs submitted relating to mortgage loan fraud increased 1,411 percent from 1996 to 2005.5
These stats are just the tip of the iceberg as mortgage fraud continues to impact not only local lenders, but also the national and international financial markets. How can financial institutions fight back to curb this disturbing global trend?