Mortgage Fraud is one of the biggest worries we face every day in the mortgage broking industry. At one of our Connective Professional Development Days, Matthew Bransgrove, (author of Avoiding Mortgage Fraud in Australia) gave some really valuable insights into mortgage fraud and how to avoid being caught out. If you missed out, don't worry - we have outlined Matthew's top ten tips below.
What is mortgage fraud and how does it happen?
You only need to have a look through ASIC's media releases to know that loan scams and mortgage fraud are realities that every broker must face and be prepared for.
The industry as a whole needs to accept responsibility for combating this growing trend and you are at the forefront of this battle.
As a mortgage broker, you are the first line of defense in identifying fraud and you need to be on your guard and understand how to mitigate the risk of it happening in your business. Mortgage fraud covers a wide range of concepts: from falsified financial documents (income and bank accounts) to identity theft. Fraud can be undertaken by one individual, or several colluding together to ensure its success. With advancements in technology such as PDF creators and high resolution scanners and printers, it is easier to doctor original documentation or create new ones. An easily accessible web means that identities, websites and fictitious identities can be created.
Matthew Bransgrove notes that with lender policies now readily available, more and more people are aware of what a lender requires, and therefore what to do to get around these prerequisites. With such powerful technology making it easier to falsify information, and more people aware of lender requirements, here are our top ten tips for some of the easiest ways to educate and protect yourself from being the unwilling participant in a fraudulent transaction.
5 Tips for identifying false income documents
Always examine documents for spelling and mathematical errors.
Complete an ABN search of the customer's employer (abr.business.gov.au) using the number on the payslip. Cross reference this to the number on the PAYG summary.
Check the net amount from the payslip is deposited into the customer's account on the salary cycle.
Complete an income check on the customer. Phone the HR department and remember that without a copy of the Privacy Act declaration that they may not be willing to disclose information, so request the borrower provides consent to them to provide details. Alternatively, you may be able to pose questions in a yes / no method such as "James has advised he has been employed in a full time capacity with you since January 2014, can you confirm this is correct?"
If the customer can provide a copy of their notice of assessment and full tax return, please ask them to provide this to you. The benefit of this is that it shows not only their income details but other information that the customer has failed to mention to you. Tax returns will list any dependent spouse and also any children that the customer may have "forgotten" to mention.
5 tips on how to check for false bank statements
Examine documents for spelling mistakes, mismatched fonts, misaligned figures and dates in the wrong order.
If the customer has a copy of a dedicated saving account which is used for their regular savings, always obtain a copy of the statement for their transactional account. This will confirm the details of (a) where their pay has been deposited (b) the regular deposits into their savings account.
Transactional accounts will also show any debt repayments the customer may have. Non disclosed debts are a red flag to a lender, so make sure that all BPAY payments to XYZ credit card on the bank statements have been disclosed to the lender on the liabilities section of the application.
Check that any cash deposits made are at a branch that is easily accessible to the customer. For example, if the customer is located in Adelaide, and the customer has regular cash deposits made at a branch in Queensland, then this should raise alarm bells.
If the customer has advised that they don't receive bank statements, you have the ability to request the customer log onto their bank while with you and download and print the statements. This will provide authentic copies and you can state to the lender that you have verified the statements.
Other important tips for spotting fraudsters
You need to be aware that individuals who are attempting to commit fraud will often push for a quick settlement. This means that everyone involved in the transaction is too busy trying to meet the deadline to complete their proper checks and look too deeply. When timeframes are tight, we often miss things that are easy to spot otherwise. So remember to be vigilant when checking your customer's information, especially when the timeframe is short.
Matthew Bransgrove advises that when a borrower attempts to commit mortgage fraud by overstating their income, providing false documents or lying about their circumstances, they are treated lightly by the law. Although criminal sanctions for obtaining money by deception exist, they are rarely enforced against borrowers who make false declarations and provide false documents.
The result is a legal environment where it is our job - the job of the brokers and lenders - to catch fraud and it is we who are penalised if we do not. As a result, lenders have increasingly responded by attempting to shift the loss for mortgage fraud onto the shoulders of other parties involved in the transaction, namely you - the broker. So with all of this in mind, consider the following:
How well do you know and trust your referrers?
How well do you know the customer?
Do you have that feeling in the pit of your stomach that something isn't quite adding up about the responses the customer is providing and the documents don't quite seem right? If so, then you are probably on to something.
Remember that no one likes to be caught out and this is especially so when you are concealing the truth. Fraudsters do not like to be videoed or recorded in the act of committing fraud, so another option if you are feeling unsure, is to advise that the session will be recorded.
Keep yourself covered with good procedures
While no reliable data is available on the cost of fraud to the Australian mortgage industry, market leaders are in agreement that it is on the rise. Finance, unsurprisingly, boasts the highest fraud rate of any industry in Australia according to KPMG's Survey of Fraud, Bribery and Corruption in Australia and New Zealand. The report found that the financial services industry accounted for 86% of all fraud in Australia and New Zealand. Always remember that you are in control of the situation and if in doubt, you can advise the customer that you are unable to assist them. It's a small percentage of the industry that is making a bad name for the rest, so don't put your reputation on the line. Good procedures, checks and balances are your strongest defence against fraud and always be on your toes.
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