Home loan fraud prevention took a major step forward last week with the creation of a data base of information on crooked borrowers and correspondent lenders.
The Mortgage Industry Data Exchange, or Midex, will store details of "alleged fraud, misrepresentation, and other serious misconduct on the part of mortgage professionals," according to the Mortgage Asset Research Institute Inc. in Reston, Va., which will operate the venture.
The information will be submitted by lenders nationwide and will be carefully screened for accuracy and consistency by the institute.
Information on alleged defrauders can go on-line, regardless of whether formal convictions were made.
Lenders will be able to use the information for quality-control checks on loans and fraud prevention, said D. James Croft, the institute's executive director.
"People for years have wanted to share information [on those who defraud lenders] and now we have found the way in which they can do it safely and fairly," Mr. Croft said.
Full Service Coming in the Fall
Midex is now in testing. It will be fully operational in the fall, Mr. Croft said.
About 15 major lenders have been asked to join in the test, he said.
He expects at least 50 major lenders to join the system when it becomes fully operational.
He said market research has already revealed a keen interest in the data base among lenders.
Many lenders have long shared information on shady mortgage brokers and borrowers on a purely unofficial basis.
Mortgage fraud has stricken lenders hard in the past.
The Federal Bureau of Investigation estimates that 10% of all mortgage applications contain some amount of fraud or misrepresentation.
$50 Billion in Losses Seen
And quality-control executives estimate the mortgage industry lost at least $50 billion to loan fraud last year.
Before Midex can be fully launched, the Mortgage Asset Research Institute must get confirmation from the Justice Department that the new data base does not violate antitrust regulations.
The institute will receive a verdict from the Justice Department in about 90 days, Mr. Croft said.
He is confident that no antitrust problems will be found.
Service Is Outgrowth of Forum
Midex is the result of months of deliberation by the Mortgage Loss Prevention Forum, a group formed by several major lenders last year to investigate the feasibility and legality of creating just such a data base.
The forum was disbanded in May.
Members of the forum included the Federal Home Loan Mortgage Corp.; Federal National Mortgage Association; Countrywide Credit Industries, Pasadena, Calif.; Fleet Mortgage Group Inc., Columbia, S.C.; and Mortgage Guaranty Insurance Corp., Milwaukee.