Just like every other industry, the mortgage industry can be affected by fraud.
Genworth has a range of risk and fraud detection strategies targeting high risk LMI proposals. Genworth's Review and Investigations team constantly monitor and review new LMI proposals that are flagged as high risk and conduct a thorough investigation of income, employment and financial history. Below are some tips to help you manage fraud.
What is fraud?
- 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.
What are the most common types of fraud affecting the mortgage industry?
There are a number of types of fraud which affect the mortgage industry. These include identity fraud, misrepresentation of an applicant’s personal details including non-disclosure of liabilities and misrepresented employment details and document manipulation.
What is 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 signs to look out for include:
- 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.
What is misrepresentation of personal details?
Deliberate non-disclosure or under disclosure of existing liabilities remains one of the most common types of fraud identified in the finance industry. This may include non-disclosure of existing debts, dependants, payment of rent or HECs and tax payments. Mortgage providers are legally obligated to lend responsibly and ensure an applicant is able to maintain the ongoing servicing of a loan. The omission of a liability directly affects the applicant’s ability to service a loan and may result in an application being declined.
A person's employment history and experience, as well as their salary, also 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.
What is document manipulation?
This is a common problem and some signs to look out 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 Manager of the employer.
What are some tips for managing 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.
Further information can be found in our Preventing fraud online learning module.