Eleven companies, including a credit reporting agency and a net branch company, have banded together to establish a national database of bad brokers.
The group has established the Coalition Against Broker Fraud and made available a national database containing a compilation of data on brokers who have participated in fraud or have left a trail of problems in their wake, according to an announcement.
The database provides an additional resource where mortgage brokerages can learn about individuals with such histories to prevent fraud from occurring in their own shop, said Ron Litt, president of Advantage Credit.
“We see it as one more thing they can do” in addition to performing background checks that sometimes fail to show fraudulent activity on record because the perpetrator moves swiftly from one employer to the next, Litt told MortgageDaily.com. Other times, there may not be a criminal prosecution on a person’s record even though the individual could have caused a problem.
“Fraud has become the number one problem in the industry,” said Litt, a former executive of Allied Home Mortgage Capital Corp. based in Houston. At Allied, “we had numerous examples of loan officers and brokers who would commit fraud and be fired from one company and go down the street and go right to work for another company the very next day.”
They could do this because information about broker fraud activity couldn’t be shared directly among companies or with regulators, Litt said — noting he’s participated in meetings where regulators question the company about the fraud rather than doing something about the individual the company reported for fraud.
The members will amass the records and information on people who have violated company policies or those of the credit bureaus, Litt said.
“We’re not making any recommendations that a person should or not be hired, all we’re doing is providing information for an employer to make the decision on them,” he added. “We want to encourage brokers to prevent fraud on the front end of origination.”
The database, which will be available in about a month, will start with a “staggering” 8,000 to 10,000 names. Access will be restricted to the 11 member companies, with the intention of becoming available to non-members through a legally-compliant process in which users are screened for access rights, the announcement said.
“I believe all the big broker shops have a stake in the game and they need to protect their interests in being able to do business as freely as possible,” Litt said. “Its becoming more and more apparent to the big net branch companies,” which have a large employee base, “that taking a position with regard to broker fraud is in their own best interest.”
“There’s more to lose than just closing one branch or terminating one employee,” as the consequences of irresponsible acts by employees can range from lenders no longer wanting to do business with the brokerage to banning the company from business in an entire state, he concluded.
The announcement directed inquiries about the coalition to Litt and Mitch Freifeld at Global Branch Solutions, — a net branch operation and MortgageDaily.com advertiser.
