MORTGAGE FRAUD. Objectives 2/13/2018 POTENTIAL RED FLAGS. List the Fraud Risk by Type. Recognize Red Flags in the Loan File

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1 MORTGAGE FRAUD POTENTIAL RED FLAGS Objectives List the Fraud Risk by Type Recognize Red Flags in the Loan File Discuss best practices for fraud prevention 1

2 What is Mortgage Fraud? Defined by the FBI as Any material misstatement, misrepresentation or omission relied upon by an underwriter or lender to fund, purchase or insure a loan. Why is Fraud Committed? 2

3 How is Mortgage Fraud Committed? Collusion among industry insiders Document falsification Re inventing old schemes Mortgage Application Fraud Increased 16.9% Long Term Upward trend from 3Q ,404 mortgage applications (.82% of all mortgage applications) Loosening credit is a factor 3

4 Factors Impacting Fraud Risk Shift from refinances to purchases Increase in Wholesale originations Upcoming Increase in home values and equity Fraud by Type FRAUD CLASSIFICATION Percentage Application Fraud 16.9% Occupancy Fraud 7.0% Transaction Fraud 3.9% Income Fraud 3.5% Property Fraud 1.9% Undisclosed Real Estate Debt Fraud 2.7% Identity Fraud 7.3% Source: CoreLogic National Mortgage Fraud Type Indicators September 2017 Report 4

5 Spotting the Red Flags Application Fraud 5

6 The Loan Application Unusual Details Inconsistencies Misrepresentation Occupancy Fraud 6

7 Reverse Occupancy Fraud Properties sold as investment properties 1st time homebuyers with minimal or no established credit Low income but significant liquid assets Large down payments Appraisal has a comparable rent schedule Living rent free in their primary residence Occupancy Fraud 7% Exercise 1, 2, 3 7

8 Exercise 1 Occupancy Fraud Exercise 1 8

9 Exercise 1 Exercise 1 9

10 Exercise 2 Occupancy Fraud Exercise 2 10

11 Exercise 3 Occupancy Fraud Exercise 3 11

12 Transaction Fraud Asset Renting 12

13 Transaction Fraud 3.9% Exercise 4 Exercise 4 Transaction Fraud 13

14 Exercise 4 Income Fraud 14

15 Financial Statements Fraudulent Paystubs Fraudulent W 2 s Tax Return information inconsistent with other information in the loan file Novelty Pay Stubs They will create a paycheck stub for you!! 15

16 VOE Income Fraud 3.5% Exercise 5, 6 16

17 Exercise 5 Income Fraud Exercise 5 17

18 Exercise 6 Income Fraud Exercise 6 18

19 POLLING QUESTION #1 What is the maximum FICA for 2016 A: $117,000 B: $118,500 C: $127,200 D: $128,400 19

20 ANSWER What is the maximum FICA for 2016 A: $117,000 B: $118,500 C: $127,200 D: $128,400 Exercise 6 20

21 Property Fraud Property Fraud 1.9% Exercise 7 21

22 Exercise 7 Property Fraud Exercise 7 22

23 Exercise 7 Undisclosed Real Estate Debt Fraud 2.7% Exercise 8 23

24 Exercise 8 Undisclosed Real Estate Debt Exercise 8 24

25 Identity Fraud 7.3% Exercise 9 Identity Fraud Credit Documents 25

26 Exercise 9 Identity Fraud Exercise 9 26

27 POLLING QUESTION #2 What should lender do in case of a FRAUD Alert on the credit report? A. Signed application, no further action is required. B. Contact the borrower at the phone no. provided on alert. C. Contact the borrower at the phone no. on the application. 27

28 ANSWER What should lender do in case of a FRAUD Alert on the credit report? A. Signed application, no further action is required. B. Contact the borrower at the phone no. provided on alert. C. Contact the borrower at the phone no. on the application. Wire Transfer Fraud 28

29 Preventing Fraud Steps for Lenders Know your third-party originators/brokers. Be fraud smart by educating your staff. Establish a zero tolerance fraud policy. Share information. If the loan doesn t make sense, don t do it! Report any suspicious activity through established channels. THANK YOU for your attention and for making Essent Guaranty your MI choice. Please complete the evaluation provided at the end of this session. 29

30 CONTACT US Corporate Headquarters Essent Guaranty, Inc. Two Radnor Corporate Center 100 Matsonford Road Radnor, PA Mortgage Insurance Operations Essent Guaranty, Inc. 101 South Stratford Road Suite 400 Winston Salem, NC CA Underwriting & Operations Center Essent Guaranty, Inc Irvine Center Drive Suite 680 Irvine, CA Client Services EssentCONNECT Underwriting

12/16/ EssentGuaranty, Inc., All rights reserved. essent.us. K1s: Are Distributions Enough? A New Look at Partnerships and S-Corps

12/16/ EssentGuaranty, Inc., All rights reserved. essent.us. K1s: Are Distributions Enough? A New Look at Partnerships and S-Corps K1s: Are Distributions Enough? A New Look at Partnerships and S-Corps 1 Before We Begin Materials Needed Mute Phones Questions Max View Polling Questions 2 Objectives Understand the GSE guidelines for