Mortgage fraud has reached 'epidemic proportions' globally and Australia is not immune:
- Over $300 of every loan in the US is lost to fraud (1)
- 1 in every 100 loans results in financial loss due to fraud (2)
- Up to 25% of all mortgage insurance claims in Australia could be fraud-related (3)
There is growing recognition that mortgage risk assessment procedures can be improved. Losses due to fraudulent misrepresentation are increasing and any response to this trend should occur prior to funding, ideally at the application assessment stage. Given the pressure on brokers, valuers and agents to maintain income, information provided to lenders can become less reliable or in some cases simply fraudulent.
RP Data can help you to:
- stop funding fraud-related or early payment defaults before the mortgage is settled;
- avoid delays to service levels by offering a 'risk score' in real time;
- identify genuine ROI and loss reduction;
- save processing costs; and
- minimise fraud with low capital costs, low maintenance costs and no software installation.
Mortgage fraud detection technologies are becoming an essential risk mitigation tool. RP Data's LoanSafe Fraud Manager has emerged as a market leader, offering significant benefits to the finance industry. RP Data’s property information expertise helps us deliver both collateral risk scoring and patented analytic pattern-based fraud detection, as well as early payment default risk scoring, all delivered via secure internet services.
When net losses over a one-year period for a major lender were analysed, it was found that approximately 2% of loans accounted for almost 40% of net losses. Finding these loans in the past has been the "needle in the haystack" challenge.
Credit scoring, no matter how detailed, cannot find these fraud losses, as credit scoring only focuses on the applicant. In most cases of fraud, and many cases of early payment default or collateral risk, the applicant's credit history holds no predictive indication of the likelihood of loss. Brokers, some of whom are responsible for these losses, are skilled at credit procedures and can effectively guide high risk applications through the credit process.
Risk scoring each loan requires minimal effort by the lender/insurer and can be run overnight or in real-time to suit each customer. As part of the evaluation stage, RP Data can risk-score loan applications to show lenders actual results, allowing customers to calculate an indicative ROI.
(1) & (2). US FBI Mortgage Fraud Findings (Published in 2007), original data sourced from The Preston Group 2006.
(3). APRA Half Year General Insurance Bulletin 2008 and information sourced from LMI investigators.