LAS VEGAS — For mortgage fraudsters, even a low success ratio can mean a big payoff.
As was noted by Glen Ogden, VP-mortgage lending for Appleton, Wis.-based Community First Credit Union, detailed a number of devious practices during the American CU Mortgage Associations' recent Annual Conference here, "Fraudsters only have to be right one time to cost an institution a large amount of money. Loan officers and fraud specialists have to be right 100% of the time."
Ogden later elaborated for Credit Union Journal on how different types of fraud are used more or less depending on conditions. An example: property flipping fraud has diminished now that home values are stagnant or sagging in many once-hot areas.
Fraud Prevention Tools
Sources for verifying consumer information include:
Beware 'Protection'
A type of fraud becoming more common is foreclosure protection. Not surprisingly, no one is being "protected," particularly the homeowner. Ogden noted so called "foreclosure specialists" prey on desperate homeowners who are behind on their mortgages and fearful of losing their houses. One of the more common scenarios is the "specialist" promises to work out the loan by buying the home and renting it back to the buyer.
"The fraudster accepts 'rent' payments, but does not pay the loan," he noted.
A sure-fire sign of trouble? If a foreclosure prevention company requires upfront fees to help negotiate on behalf of the homeowner with his/her lender, Ogden said.
Look Out for 'Chunking'
CUs must beware of "chunking" schemes, which usually arise from real estate investment clubs. Ogden said the fraud comes when purchasers apply to multiple lenders for financing without disclosing multiple properties are being acquired. Ogden said participants in chunking schemes are recruited at seminars promising to teach people how to "get rich in real estate."
In a Word: Verify
Verify, Verify, Verify. Ogden noted this is especially important in the case of income or employment verification fraud. There are a large number of schemes that fall under this heading, but the general rule is to watch for anomalies in documentation.
"Income, employment and asset verification fraud is much more prevalent in down times, because people are desperate," he explained. "Because there was such a boom, and values had increased so rapidly for so long, it hid a lot of fraud. People could just refinance if they were in trouble, and a lot of problems just went away. But now they can't."
Red flags include the employee's or company's name not being imprinted on a check, handwritten checks, paystubs or W-2s; typed W-2s with computer-generated paystubs, or a W-2 that is not the employee copy (Copy C).
"Also watch for income that is not consistent with a type of employment, or round numbers given for income or assets," Ogden warned.
