FRAUD

Just like every other industry, the mortgage industry can be affected by fraud.

There are specific types of fraud that are more common to the mortgage industry.

What is fraud?

Fraud is:

• A deception deliberately practiced in order to secure unfair or unlawful gain.

• A piece of trickery; a trick.

• One that defrauds; a cheat.

• One who assumes a false pose; an impostor.

Deception and false statement are the most common types of fraud. Some instances where false statements can appear include; a false income statement is presented in a loan application, false income figures on a tax return or false assets and undeclared liabilities.

Common types of fraud affecting the mortgage industry

There are a number of types of fraud which affect the mortgage industry including Valuation fraud, identity fraud, employment fraud and document fraud.

Valuation fraud

Even though a valuation may look valid, it may be a forgery. A computer and a scanner are all the tools a fraudster needs to manufacture false valuations.
Make sure you check a valuation for the following:

• A valuation may be received from a valuation company that is not registered or authorised to perform valuations.

• A real valuation may be altered from the original.

• The value of a property may be intentionally inflated.

Identity Fraud

Identity Fraud is a growing global issue that is associated with money laundering, organised crime, people smuggling and terrorism. It may involve the theft of a real person's identity or the creation of a totally false identity.

The immediate implications of lending money to a person that does not exist are obvious, however the more sinister implications of identity fraud may not be as immediately recognisable

The impact of identity fraud - especially in real estate matters - can be dramatic. On a personal scale, identity fraud can cause a family to lose their house or ruin a person's ability to obtain a loan.

Some red flags for identity fraud are:

• Yahoo or Hotmail email addresses

• No landline phone number

• Minimal credit history

• Employment history or residential address history different on application to the credit history

• Date of Birth differs to credit history report

• Mortgaging a previously unencumbered property.

Employment Fraud

A person's employment history and experience, as well as their salary, have bearing in the success of a loan application. The self-employed can be difficult to assess, and ACN's or ABN's must be checked. False self-employment or false external secondary employment can boost income to a level that leads to a loan application being approved. Where documents have been supplied, those documents should be scrutinised for inconsistencies.

Document Fraud

This is a common problem and some signs to look our for include:

• Tax documents containing rounded numbers. Does it look right?

• Pay slips. Generic appearance of payslip or expensive payroll system for small company. Does the amount seem reasonable?

• Pay dates falling on a Saturday/Sunday

• Bank statements. Check deposits and withdrawals. Are deposits made from employer? Are living expenses accounted for?

• Spelling error of applicant or employer, grammatical errors, letter signed by a person related to the applicant, letter signed by a person other than the Director/Proprietor/Payroll Officer/Human Resources of the employer.
  

Below are a number of tips and ideas that can help you to minimise the risk of fraud;

• Review your verification and authentication procedures
• Be proactive about verification; pick up the phone and use an independently sourced phone number to verify employment details
• Train and equip credit and other support staff
• Be vigilant with documentation
• Implement a staff fraud reward initiative
• Invest in technology, capturing risk at early stages will decrease the cost to your organisation in the long run
• Make sure you work with legitimate valuers
• Be responsible and vigilant; fraud management  is the responsibility of the whole mortgage industry