ORLANDO, FLA. - Mortgage fraud was a hot topic at the Mortgage Bankers Association's 92nd annual Convention and Expo 2005 held here last week, with participants noting the financial drain to both lenders and borrowers at the panel titled Mortgage Fraud Against Lenders: The Growing Threat to Lenders and Homeowners.

"The industry needs to be the driving force in combating mortgage fraud," said MBA Director Timothy Doyle, noting the Association's efforts to "raise the profile" of this growing problem that led to a Congressional hearing on mortgage fraud against lenders.

One problem, participants said, is the lack of information sharing between lenders about fraud that occurs in the mortgage application process. Ann Fulmer, vice president of industry relations at Interthinx, added that information sharing is vital at this juncture so that fraud "does not turn up elsewhere." Derek Siegle, assistant section chief in the financial crimes division of the Federal Bureau of Investigation, said that information sharing and reporting enables the FBI to be proactive in its efforts to combat mortgage fraud.

Tools in dealing with fraud include loan officer licensing and education, agreed panelists, underscoring the importance of training frontline underwriters in detecting fraud. The process of broker licensing has become a money making scheme, making the enforcement of this requirement an issue, participants added.

Arthur Prieston, chairman of The Prieston Group, added that both lenders and borrowers are victims of this problem and that there should be more involvement from various market participants, including title companies and settlement agents. "We are not sharing enough risk," Prieston said.

Other panelists said that part of the problem is loan underwriting standards that are questionable to begin with, such as low FICO and documentation mortgages, including loans to borrowers claiming to have "absurd salaries." "Investors should take a look at the lending practices of lenders they are buying from," said James Croft from the Mortgage Asset Research Institute.

Further emphasizing the seriousness of the issue, Regina Lowrie, newly elected MBA Chairman, said in her opening session remarks that fighting fraud against lenders is a key MBA priority in 2006. "We are seeking better communications, stronger enforcement and innovative preventive tools," Lowrie said.

(c) 2005 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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