Mortgage fraud can be defined as any material misrepresentation on a loan application that influences a mortgage lender to approve an application that would have otherwise been underwritten differently or even declined. This includes intentionally withholding information that should have been disclosed to a mortgage originator.

This type of fraud is becoming a growing concern to all in the residential mortgage business as well as the general public. Increased public awareness and vigilance through ongoing training of mortgage professionals and stakeholders is viewed by AIG United Guaranty as key in stemming the problem at origination.

Mortgage fraud affects consumers, communities, and the lending industry in various ways, with costly results for everyone – except the perpetrators of the crime. Knowing what mortgage fraud is, how it works and how to recognize it is key to prevention. This places more emphasis on the consistency of information supplied to mortgage originators than ever before.

When a loan originator suspects fraud, some of the key questions to ask include:

1. COMMUTE TO WORK

• Is the distance from the applicant’s present employment to the property being purchased reasonable?

2. DOWN PAYMENT

• Is the down payment consistent with the borrower’s income?
• If gifted, are there other liquid assets which have been declared that could have been used instead?

3. INCOME

• Is the income stated consistent with the type of occupation and the applicant’s job tenure?
• Does the date of hire fall on a weekend or holiday

4. EMPLOYMENT

• Is the signatory to the employment letter using a generic title, for example, “Manager”, “Administrator”, or “Accountant”?
• Is the company’s phone number a cell phone?
• Is the job tenure consistent with the borrower’s age?

5. BORROWER

• Is the borrower buying an investment property, but currently renting the present home?
• Is the borrower buying the property from the current landlord?

6. CREDIT REPORT

• Have the trade lines been opened over time, or have they all been opened at the same time, and recently?

7. SALE & PURCHASE AGREEMENTS

• Is the property available on MLS?
• If the sale is private, is it arm’s–length?
• Is the deposit going to the vendor instead of a trust account with a solicitor?

AIG United Guaranty encourages lenders to report all cases of mortgage fraud and misrepresentation upon discovery. We are committed to sharing information following review of such cases with our lender partners and other stakeholders in the industry in efforts to combat the problem.

If you require more information about prevention of mortgage fraud, or if you need training on mortgage fraud awareness and prevention, please contact your local AIG United Guaranty Account Executive. Fraud tips and reports may also be e-mailed to fraudwatch@aigug.ca.