|
Special Reports
Mortgage Fraud: Protecting
The Investment
NYSBD Investigator Tells Professionals What to Watch For
'It's important to follow some basic ... concepts.'
WHITE PLAINS, NY -- Professionals from all walks of the mortgage industry, including
mortgage brokers, real estate brokers, title agents and appraisers, need to be aware of the possibility of fraud
on a daily basis, according to Delroy Levy, a criminal investigator with the New York State Banking Department.
Mr. Levy recently spoke to the National Association of Professional Mortgage Women
at the spring regional conference hosted by the Westchester/Rockland Association here.
New regulations such as Part 41, regarding high-cost home loans, are aimed to
prevent abusive lending and curtail fraud - not to prevent mortgage brokers from making money, he said.
Currently, Mr. Levy is working on approximately 15 different cases of mortgage
fraud. He receives half a dozen calls a day, and during a typical week, he works with four different governmental
agencies to investigate a case.
The scams he sees today have been around for years, Mr. Levy told those in attendance.
The same names keep coming back around over and over again. "No one is reinventing the wheel. These are the
same old schemes being perpetrated, but they could have a devastating effect on the industry," he said.
"That is why it's important for you to follow some basic, fundamental concepts
in order to protect your business and reputation."
Mr. Levy recommended outreach to consumers as well as to other professionals in
the industry. Hold training sessions, conferences and maintain rigorous communication with employees and other
originators who have a presence in your community, he advised, and investigate any new company you decide to do
business with.
"A lot of times it's better to stick with people you know. Do credit checks.
Compare charters. Get input from other people in the mortgage industry, or you could become a victim."
If a new company approaches an originator, Mr. Levy suggests getting referrals
and finding out who the company did business with before. In many cases, it's wise to make phone calls to those
companies to see if any complaints connected to mortgages exist.
"It's better to take those steps now rather than defend your self later,"
he said.
If the Banking Department discovers that fraud has occurred, it will take the
case to the prosecutor's office, and the originator could face charges of grand larceny, conspiracy and enterprise
corruption.
"If your name is attached to a scandal, you could be dragged into court as
a party in a civil lawsuit. In the end, even if you have no connection with the case, for the sheer fact that your
name was mentioned, it could have an impact on your business. That is why it's important that you take prudent
first steps now, especially with businesses that require third-party services in the transaction. Exercise a high
level of due diligence."
Some of the cases Mr. Levy has seen include the falsification of income. A borrower
makes $30,000 a year, but a crooked mortgage broker puts down $350,000 on the report.
"The broker makes up a job, fake W-2's, phony tax returns, and the loan is
closed. Joe Citizen moves into the home, and lo and behold, he can't make the payments and defaults on the loan."
A more elaborate scheme includes the takeover of a deed. A boiler-room operation
might scout out a neighborhood and find a dormant home, go to the county clerk's office and get a copy of the deed.
The perpetrator then makes up a new deed and transfers the mortgage title.
Or if the perpetrator finds that a mortgage needs to be paid off, he/she can white-out
the mortgage from the title, and put two mortgages in place instead of one. All that person has to do is change
the dates and names, according to Mr. Levy. There are even times when a fictitious borrower comes to the closing.
"There are other alterations that can take place on an appraisal or title
report. Photographs could be substituted for the final property at an inflated value. Make sure the closer reads
the report carefully. There are a lot of things some people are not aware of," he said. "Don't just read
the title report. Get a copy of the recorded deed. Pull it up on the county's computer. Check to see if there is
an affidavit of closing."
Because identity theft is on the rise, Mr. Levy says it is extra-important for the borrower to present an I.D.
at the beginning of the loan process and at the time of closing the loan.
Making loans through electronic mail is on the rise, which could lead to more
cases of fraud. The originator never sees the applicant, yet it does not remove the obligation of the lender to
verify information.
"Find out where they are. Run credit checks, employee verification. Check
the yellow pages. Does this lender exist?"
|
