Podcast
Questions and Answers
What is the minimum time period that funds must be present in a borrower's account to establish seasoning?
What is the minimum time period that funds must be present in a borrower's account to establish seasoning?
Which method can help detect employment and income fraud?
Which method can help detect employment and income fraud?
What type of fraud is challenging to detect due to the borrower's intent being known only to them?
What type of fraud is challenging to detect due to the borrower's intent being known only to them?
Which of the following could be a red flag for occupancy fraud?
Which of the following could be a red flag for occupancy fraud?
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What is required to report unusual transactions to the Financial Crimes Enforcement Network (FinCEN)?
What is required to report unusual transactions to the Financial Crimes Enforcement Network (FinCEN)?
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Which of the following activities is considered suspicious according to FinCEN?
Which of the following activities is considered suspicious according to FinCEN?
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What document is a borrower required to provide to explain recent deposits that seem out of the ordinary?
What document is a borrower required to provide to explain recent deposits that seem out of the ordinary?
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What should lenders NOT disclose regarding Suspicious Activity Reports (SARs)?
What should lenders NOT disclose regarding Suspicious Activity Reports (SARs)?
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Which scenario might indicate asset fraud when reviewing bank statements?
Which scenario might indicate asset fraud when reviewing bank statements?
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What could indicate that a borrower's stated employer is not legitimate?
What could indicate that a borrower's stated employer is not legitimate?
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What is the primary purpose of obtaining a general authorization form from borrowers?
What is the primary purpose of obtaining a general authorization form from borrowers?
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Which information is NOT typically confirmed by employers during the loan application verification process?
Which information is NOT typically confirmed by employers during the loan application verification process?
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When verifying income, what should lenders compare to ensure consistency?
When verifying income, what should lenders compare to ensure consistency?
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What action should be taken if a loan applicant is reluctant to authorize contact with their employer or institutions?
What action should be taken if a loan applicant is reluctant to authorize contact with their employer or institutions?
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What type of records may lenders request from the IRS to verify suspicious income?
What type of records may lenders request from the IRS to verify suspicious income?
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What type of information can depository institutions provide regarding the borrower's accounts?
What type of information can depository institutions provide regarding the borrower's accounts?
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Which of the following steps should be taken prior to closing the loan?
Which of the following steps should be taken prior to closing the loan?
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Which document types are excluded from being considered for verification of income?
Which document types are excluded from being considered for verification of income?
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Study Notes
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.
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Description
This quiz explores the essential processes involved in verifying loan applications to identify and prevent fraud. It covers the verification of various applicant information, including employment details, bank records, and credit reports. Understanding these protocols is crucial for lenders to ensure accurate and reliable lending practices.
