Scotsman Guide - December 2011 Residential Edition

By Denis G. Kelly
Chairman
Identity Ambassador
Commission

Become;the;Front;Line;of;Defense
Know who you’re dealing with to minimize mortgage fraud at the application stage

Identity theft is the primary compo- nent of mortgage fraud for many different scams. For mortgage originators, the best defense is to know all your borrowers personally. This is a novel concept, but in the real world of mortgage lending, it is impractical.

Past Articles

by Denis G. Kelly

“Your data Has Been Breached. Now What?” October 2011

“ 10 Ways to Avoid a data Breach,” September 2011

“Learn to Keep clients Safe,” August 2011

“I Am My client’s Keeper,” July 2011

View;these;articles;and;more;at scotsmanguide.com

The next-best defense is to follow simple identity-theft-prevention tactics. Mortgage professionals who conduct identity-theft-prevention training seminars provide useful education for their clients and gain tremendous business-development opportunities.

Unfortunately, most borrowers do not receive this education. Thus, mortgage originators, as identity-theft-prevention experts, become the default crime stoppers.

In addition to knowing what measures you can take at the application stage to detect potential identity theft, it is helpful to understand which mort-gage-fraud methods use identity theft as a primary component. With this knowledge, brokers and originators can be a solid front line of defense against mortgage fraud.

4 categories of fraud
There are four primary categories of
mortgage fraud that use identity theft,
but savvy criminals are constantly
evolving. They frequently combine tac-
tics or develop stealth methods that
are undetected for many years.

2.;house;stealing: The FBI coined this term to describe when a thief steals a house without the homeowner even knowing it. Thieves gather the homeowner’s name and other personal information, create fake identification documents and execute a property transfer. This property is typically sold to another member of the criminal gang, who is also using a stolen identity, and the thieves walk away with practically untraceable loot. Homeowners continue to live in and pay the mortgage for a home they no longer own until they are served a default or eviction notice.

3.;straw;man: There are several variations of this scam, but the most common in conjunction with identity theft is when the criminal promises to assist struggling homeowners by refinancing their loan. Instead, the property is purchased with a stolen identity, or straw buyer. The criminal never pays the loan and pockets the proceeds. The original borrowers lose their title, and the lender inherits a defaulted property with maximized leverage.