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BasePoint Offers New Software to Help Lenders Monitor Broker-Facilitated FraudBy James Comtois Designed to assess mortgage broker risk, BrokerWatch, the pattern recognition software, was developed in response to lender demand for products and services to help curtail the growing multibillion-dollar mortgage fraud problem where broker-facilitated fraud presents the most serious risk. BasePoint's BrokerWatch software provides detailed performance reporting and pattern recognition scoring to predict which brokers are most likely to submit loans that will result in fraud, repurchase, early payment default and discount sales. By providing a lender with a single view into their most risky and least risky brokers, the lender can then use that insight to identify which brokers and loan officers might require further review. BrokerWatch also provides reporting on multiple historic performance indicators, a fraud score, as well as a drill-down capability to allow the lender to review individual loans that a broker has submitted historically or any loans currently in the pipeline. The individual loans in the pipeline can also be scored and ranked for risk by the company's FraudMark software to show the lender which specific loans should be reviewed further before funding. Additionally, the software provides a lender with an intelligent way to update their own broker watch list, perform directed audits and identify fraud schemes occurring across loan files. BasePoint's release of BrokerWatch is part of a suite of fraud detection software designed to bring next generation fraud solutions to the mortgage industry. Lenders are increasingly demanding more scientific and accurate fraud solutions. Intelligent monitoring of brokers is important, according to Barbara Mallott, senior vice president and director of quality assurance for Aegis Mortgage Corp. "We have rigorous criteria for our brokers, and we hold them accountable to the highest standards of ethics," she said. "At the same time, we cannot turn a blind eye to the reality that broker fraud does take place. We monitor our loans very closely for potential fraud to protect our customers, our brokers and shareholders." Through its work with leading mortgage lenders, BasePoint's fraud scientists have amassed a database containing more than three million historic loans originated by more than 50,000 brokers. The team of scientists conducted a detailed analysis of that data, which included more than 150 million loan attributes, and concluded that the most serious mortgage fraud risk is broker-facilitated fraud. The study revealed that the overwhelming majority of brokers submit only good loans while a very small number will account for all the bad loans, including fraud and early pay default. In one case, as little as 3% of brokers were responsible for all fraud and early pay defaults, but in all cases, 12% or fewer brokers accounted for all of the bad loans submitted. The study also revealed that in many cases these brokers "hit and run" by submitting a large volume of bad loans within a short period of time to a given lender, and then move on to a new lender to avoid detection. According to Tim Grace, president and CEO of BasePoint, lenders need to constantly monitor loan level details for each individual broker. By combining a lender's loan level detail with BasePoint's predictive analytics, BrokerWatch provides lenders a targeted and efficient means of managing broker risk. "Historically, lenders have relied on negative file solutions," he said. "BrokerWatch provides a new level of insight into broker behavior, loans submitted by brokers and broker performance. This insight will enable lenders to work with individual brokers to identify areas of risk, correct them and continue benefiting from the broker relationship." BrokerWatch is complementary to BasePoint's flagship product, FraudMark, which uses patent-pending neural network technology to combine two unique and highly effective approaches for finding fraud: behavior history and historical patterns of both fraudulent and non-fraudulent loan applications. FraudMark helps mortgage lenders cost-effectively score loan applications in real time, driving down fraud losses and increasing overall production. |
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