By Denis G. Kelly
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.
by Denis G. Kelly
“Your data Has Been Breached.
Now What?” October 2011
“ 10 Ways to Avoid a data Breach,”
“Learn to Keep clients Safe,”
“I Am My client’s Keeper,”
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
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
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.
4. fake identification documents for
purchase: This is most frequently
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