Loan Application Verification and Fraud Detection

Loan Application Verification

• Loan processing centers on verifying loan application information to detect fraud.
• Lenders need independent confirmation of applicant information, requiring borrowers to authorize sharing.
• Borrowers sign forms granting permission to obtain info from employers, banks, and credit agencies.
• Lenders verify employer information like salary details, position, employment duration.
• Bank information includes account opening dates, history, balances, and ownership details.
• Lender verifies borrower-provided documents (paystubs, bank statements).
• Comparing income to bank deposits ensures consistency..
• Tax returns and IRS records verify suspicious income.
• Credit reports and supplements confirm application data.
• Re-verification of employment and assets is crucial before closing.
• Authorization for direct contact with employers/institutions is vital. Lack of authorization is a red flag.

Asset Fraud Detection

• Review of borrower bank records for the last two months helps spot unusual activity.
• Examine cash flow for signs of new debt, and analyze available funds.
• Documentation of funds' source is necessary.
• Money must be in account for at least 60 days to demonstrate rightful ownership.
• Uncommon deposits need documented explanations.

Employment and Income Fraud Detection

• Internet searches can uncover discrepancies between stated and verifiable employment details.
• Verification of the employer's existence, address, and business registration is crucial.
• Scrutinize employer details, such as whether the applicant is listed as a CEO, owner, or president.
• Third-party verification services offered by major credit bureaus are options.

Occupancy Fraud Detection

• Occupant fraud is challenging to detect since intent is often unknown.
• Discrepancies between stated residence and information on bank statements or correspondence are suspicious.
• Properties claimed for occupancy might be less valuable than others the applicant owns.
• Analyze tax returns for real estate transactions or income from rental properties.
• Credit reports may show inconsistencies with stated residence history, such as newly obtained mortgages.
• Internet searches of the property address help identify its existence on short-term rental websites.
• If the current residence is not listed on the market (for sale) and is claimed to be an investment property, further scrutiny is warranted.

Suspicious Activity Reporting (SAR)

• Financial professionals must report suspicious activity.
• FinCEN (Financial Crimes Enforcement Network) is the central reporting hub.
• SARs are used to combat financial crimes like money laundering and financing terrorism, referred to law enforcement.
• Suspicious activity involves transactions potentially linked to illegal activities, evading laws like the Bank Secrecy Act, or lacking apparent purpose.
• SAR information is highly confidential and must not be shared with the reported party or anyone who might share this with them. Disclosure is a crime with national security implications.
• Sharing SAR information is allowed with certain parties like law enforcement, federal agencies, and reporting organization employees on a need-to-know basis.