FirstBank OnBoarding Manual - Flipbook - Page 58
MORTGAGE FRAUD
WHAT IS MORTGAGE FRAUD
Mortgage fraud is a sub-category of Financial Institution Fraud. It is crime characterized by some type of material
misstatement, misrepresentation or omission in relation to a mortgage loan which is then relied upon by a lender.
Stated differently, mortgage fraud is the intentional enticement of a lender to approve, buy or ensure a mortgage
loan when it would not have done so with truthful information.
There are two distinct areas of mortgage fraud:
1) Fraud for profit.
Those who commit this type of mortgage fraud are often industry insiders using their specialized knowledge
or authority to commit or facilitate the fraud. Current investigations and widespread reporting indicate a
high percentage of mortgage fraud involves collusion by industry insiders, such as bank officers, appraisers,
mortgage brokers, attorneys, loan originators, and other professionals engaged in the industry. Fraud for
profit aims not to secure housing, but rather to misuse the mortgage lending process to steal cash and
equity from lenders or homeowners.
2) Fraud for housing.
This type of fraud is typically represented by illegal actions taken by a borrower motivated to acquire or maintain
ownership of a house. The borrower may, for example, misrepresent income and asset information on a loan
application or entice an appraiser to manipulate a property’s appraised value. Investigators conduct quality control
reviews on the bank’s loan files specifically looking for evidence of a misrepresentation or an insider shortcut.
MISREPRESENTATION REPERCUSSIONS:
• Can easily result in costly repurchase demands and potential reputational damage to FirstBank.
• Could result in a time-consuming, in-depth investigation.
• Could result in a termination/ruin one’s career in the mortgage industry.
• Can put associates in a position to be questioned.
Many reportable mortgage fraud cases involve false statements perpetrated by a bank insider who thinks he/she is:
• Doing a “favor” for a borrower or “helping” a borrower by not wanting to inconvenience them with more
signatures and document requests.
• “In a hurry” to get the file completed in order to meet closing deadlines or “in a hurry” to get home, pick
up children, get to the next appointment, etc.
• “Tired, worn out or frustrated” by being pressured or intimidated by a borrower or another loan officer.
• Just “keeping up with their production numbers” to keep their supervisor pleased or to hit their incentive.
• Going to take “one little shortcut,” just this one time.
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Onboarding Manual
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