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Plethora of Fraud Prevention Tools

Mortgage News

As the discovery of mortgage crimes continues to escalate, several companies have responded with services intended to mitigate fraud damages.

C&S Marketing, PCi Corp., Verification Bureau, First American CREDCO and Fair Isaac Corp. all recently announced services that help prevent fraud.

The FBI recently reported that the number of mortgage fraud reports filed by financial institutions escalated to 17,127 last year from 6,936 in 2003 — with reported losses of $429 million way up from $225 million during the period. States reporting the most cases were California, Colorado, Georgia, Florida, Illinois, Michigan, Missouri, Nevada, South Carolina and Utah. Inflated appraisals, nonexistent property loans, property flipping and fictitious/stolen identity were among the most common schemes, according to the FBI May 2005 Financial Crimes Report to the Public.

To combat the increase of fraudulent schemes, C&S Marketing announced Thursday that it has created two mortgage fraud prevention solutions, HistoryPro, a collateral risks scoring tool, and Broker Scorecard, which quantifies and scores both loans and the brokers.

Enterprise compliance solutions provider PCi announced it partnered with mortgage fraud prevention solutions provider Verification Bureau to provide an integrated income verification and compliance solution for lending institutions.

Through the partnership, PCi said lenders can now combine its HMDA management, anti-predatory lending compliance and flood determinations capabilities, with Verification Bureau’s 4506 processing offering, IRS Records, which automates tax verifications.

Then there’s First American’s tool. The provider of specialty credit reports to the mortgage industry recently announced its Fast Alert screening report notifies borrowers when suspicious activity occurs in their credit file.

First American, a provider of specialty credit reports to the mortgage industry, estimates that 10% to 15% of all mortgage applications involve fraud.

Identity theft has been the most common form of fraud over the past five years and has grown considerably over that time, the Federal Trade Commission recently reported. Within the identity theft complaints filed with the FTC, the number alleging that stolen personal information was misused to obtain a real estate loans reportedly grew 36% between 2003 to 2004.

FICO score creator Fair Isaac came up with the Falcon One, an enterprise software solution the company says can help lenders combat both existing and emerging types of fraud at every customer interaction.

“With the complexity of the current business environment and the growing sophistication of fraud perpetrators, gaining control of fraud losses requires an enterprise-wide approach,” said Ted Crooks, Fair Isaac vice president of Fraud Protection Solutions, in a prepared statement. “Incorporating the Fair Isaac fraud technology that protects two-thirds of the world’s credit cards today, the Falcon One system provides financial services providers with essential connections and flexibility to reduce the impact of fraud at every point of customer contact.”

The system’s configurable set of detection, case management and analytic capabilities reportedly allows lenders to address mortgage fraud, identity theft, internal/employee and any other type of fraud across different channels and lines of business. The system can determine the likelihood that a particular activity is fraudulent and provide a fraud score. Its infrastructure also offers services that provide lenders with the most current data for their fraud management system and guard against misuse of account and identity data before losses mount, according to the announcement.

The Falcon One system leverages Fair Isaac’s 15-year-old fraud fighting technology and has within its infrastructure other solutions offered by the company, including those for credit card and debit card transaction fraud and identity fraud protection, which can be deployed individually or in combination for additional fraud detection power. Additionally, the infrastructure offers real-time data sharing services and continually updated profiling of customers, merchants and institutions.

The system’s “platform simplifies the management of a very complex problem within financial institutions — the ever-changing nature of fraud,” said Financial Insights analyst Sophie Louvel. “The traditional approach to fraud will not work against new fraud schemes that emerge on a daily basis. Improved collaboration between bank departments will help banks respond more quickly to new fraud schemes, further reducing the risk of loss.”

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