Cotality processes hundreds of alerts and matches them with known fraud cases to better predict where fraud will occur. Two areas that are connected and have seen increases in fraud are income and occupancy fraud. Income fraud was when the buyers or investors had high income relative to the property they were purchasing.
“In income, there was one that really fired a lot: high income when the property value is low,” Seguin said. “It led you down two paths. One was inflated, exaggerated income. Or, maybe it’s a sign of occupancy misrep. Somebody’s buying a house, an owner-occupied house well below their means, and it’s trying to trigger you to think, does this loan make sense? On paper, everything looks great. But it is that old underwriter, common sense check that takes place there.”
Identity fraud growing
Another area brokers might not consider when looking for fraud is identity theft. It is much more common in other types of credit products that need less documentation. But it is showing up in Cotality’s data as an area to keep an eye on, Seguin said.
“That one is interesting, because I think I see a lot of news about identity fraud, but it’s not really in the mortgage space,” he said. “It’s more in banking or personal lending where that seems to take place. Identity fraud doesn’t seem to be as much of a player in the mortgage fraud world, but we did have some alerts that really started jumping out this last quarter that were worth mentioning here.”
Seguin believes some of the issues could just be simple mistakes when entering Social Security numbers. However, there are stories of people acquiring data from deceased individuals.