Published on April 18, 2019
Written by Joseph Prettner
I recently read a great article called Fraud Will Rise Again (And 10 Other Predictions for 2019) by Frank McKenna, chief fraud strategist for AI firm PointPredictive. Before diving in to predictions for 2019, he revisits a few from 2018, one of which was that digital identity would gain even more significance. That idea was borne out in several ways, including Lexis and TransUnion’s acquisitions of companies that protect consumer data and prevent fraud.
I was now starting to feel like these large data companies may know something I don’t. My confidence in McKenna’s predictions strengthened, I kept reading. I skimmed most predictions until the fourth one caught my attention: Prediction 4 – “Mortgage Fraud Will Increase to Highest Level Since The Meltdown of 2009.” It referenced Corelogic’s fraud index to show mortgage risk rose in 2017 and hasn’t slowed down. “Mortgage lenders and banks should be prepared for the risk of fraud to be 1% (100 basis points) of all their applications,” McKenna says.
After checking Corelogic’s fraud reports myself, I tend to agree with Frank’s assessment.
Hearing warning bells blaring about fraud being on the rise, I began thinking about how this might impact credit unions and community banks, who are generally more local and have close ties with their client bases. I pooled the data we have compiled while performing mortgage quality control services for Servion and our partners and made some predictions of my own.
More institutions will adopt point-of-sale (POS) software systems allowing borrowers to complete applications digitally. This creates opportunities for data breaches as loan information is being collected, stored, and transferred to loan origination systems (LOS), offering hackers the chance to steal logins and data.
More cloud-based and/or web-based LOS. Many of us remember having to load our LOS onto computers using compact disks or even large sets of floppy disks. Those days are behind us and we have already seen platforms that are accessed through a secure website. With these systems moving to the web and cloud their data has the potential of being stolen.
I predict (and admit there isn’t much evidence yet) that we will start to see the rise of third-party fraud schemes for mortgage funds. Think of a straw buyer scheme without having to use a buyer. With the proliferation of digital loan applications, auto-verified assets and income, shorter processing time to close, and remote closing, I predict we will hear of a mortgage transaction completed digitally with a false identity. I hope I am wrong; however, it appears the table is set for a fraudster to access an applicant’s data and request a loan. There are many systems in place to catch this so we will see if they work.
Here at Servion, we will soon implement additional quality control measures to effectively review some of these changes. Those measures include reverification of digitally submitted data as well as independent SSN and identity checks. If you want to know more about what we do or what you can do, please get in touch with me any time: firstname.lastname@example.org.