Two rival national fraud-detection databases with different approaches have hit the market this month.
Merscorp Inc. and Interthinx, a unit of Verisk Analytics, launched their database at the Mortgage Bankers Association's annual convention in San Diego. Less than a week later, First American CoreLogic, a unit of First American Corp. of Santa Ana, Calif., responded by rolling out its own fraud-detection database.
While First American CoreLogic touts its greater wealth of data, Mers and Interthinx stress the collaborative nature of their database, which they say is conceived as a "public utility" for the industry.
Mers' FraudAlert lets lenders identify suspected fraudulent activity in loan applications and share information about it. It will help identify and prevent fraud through the sharing and reporting of key data among the more than 62 million loans currently on the Mers loan registry system. Lenders using Mers FraudAlert will submit loan application data and incident reports with suspected or confirmed fraudulent activity to a centralized database. The system will then notify other lenders whose loans that may have connections to the data, alerting them to possible fraudulent transactions in their pipelines.
"While the industry currently has access to excellent loan-level fraud-detection technology, lenders still face unacceptable risk. Fraudsters circumvent those tools by perpetrating multiple instances of fraud concurrently, because no one is speaking to each other," said R.K. Arnold, Merscorp's president and chief executive. "Only by creating a collaborative industrywide fraud-prevention database can this activity be stopped."
Lenders that register their loans on the Mers System will have immediate access to the database of fraud-related information through the new product, making any fraud-screening technology more effective. "Our technologies are most effective when they have access to more data," said Kevin Coop, the president of Interthinx.
First American CoreLogic said its national data repository can help clients better combat mortgage fraud and enhance the predictive performance of the company's antifraud applications, features that it says make the database more comprehensive than what Mers and Interthinx have done. The First American CoreLogic National Fraud Database includes more than 80 million loan applications, about 65% of all loan applications annually, and aggregates fraud data from more than 35 lenders and investors with application and performance histories dating to 2005.
The First American database uses fraud information, including default, foreclosure, chargeoff and repurchase indicators, to build pattern-recognition scoring models. The database accepts daily contributions of application and lien information from 17 lenders within First American's Multi-lien Closing Alert Program.
The database also includes title, lien release and payoff information to help spot various types of first- and second-lien fraud; third-party information including loan information on more than 160,000 brokers, 135,000 appraisers, account executives, loan officers and retail branches; and property and neighborhood-specific fraud and foreclosure data.
"The best scoring and analytic products stem from, and rely upon, robust data assets," said Tim Grace, First American CoreLogic's senior vice president of fraud analytics. "We commend Interthinx and Mers, but we're not asking lenders to contribute their data — we already have that data. We have data on 65% of the loans originated this year."
Interthinx and Mers say the issue is not who has more data, it's about creating an industry utility where all the information is accessible to any risk mitigation vendor. Mers and Interthinx maintain that vendors should compete on the value of their fraud-detection services and not on access to data.
"Clearly the quantity of data and quality of algorithms are crucial factors for any effective fraud-prevention database," Arnold said. "And some entities, including Interthinx, can proudly boast about those elements. … But the joint effort of Mers and Interthinx has yielded a unique, game-changing technology with systems that will enable the entire industry to collaborate, share and track suspicious activity and confirmed fraud."