Mortgage fraud detection company Interthinx said it uncovered more than 42,000 mortgage applications worth nearly $11 billion that contained “significant misrepresentations of the borrowers’ income.”
The applications were reviewed in the last six months of 2007 and discovered using the company’s FraudNet Loan Exchange program (FLEX), which generated 42,610 Income alerts.
An Income alert is triggered when borrowers submit multiple loan applications that reveal at least a 15 percent jump in income from one application to the next within a specified period of time.
From there the program can determine if a loan application has been falsified to facilitate qualification.
“The industry has not recognized the pervasiveness of fraud in part because lenders have legal obligations to protect consumer data. So if ‘ABC Bank’ discovers a fraudulent application, it can’t tell ‘XYZ Bank’ to watch out,” said Kevin Coop, president of Interthinx.
“Through FLEX, Interthinx is able to compare data from all of its clients’ applications and reveal the deceptions without compromising consumer privacy. Knowing the truth lets our clients prevent billions in losses. What is really disturbing is that the $11 billion represents just one of the alerts used in the six-month timeframe.”
Typically, mortgage lenders can only view loan applications submitted within their own database, but it appears this product creates a centralized system to determine where else borrowers may be submitting applications and what information they contain.
“For the first time, the industry is getting a real-time look at the scope of mortgage fraud, and these numbers are staggering,” said Coop. “Based on what we’ve seen over the past few years, these results confirm what we’ve been saying all along: fraud is the rotten core of the mortgage meltdown.”!