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Connexus : Issue 43
Check and double-check Mortgage fraud investigators warn: if something doesn't look right, it probably isn't. BY CHRISTINE LONG Among the perpetrators of large- scale mortgage fraud in recent years is a property developer who sold house and land packages at infated prices to his own ethnic community. The developer frst sold packages to family members at very high prices to create a valuation foor, then sold them to others who relied on the prior sales data. As the case unfolded, it was discovered that some of the people who had taken out mortgages to buy the house and land packages were unemployed, says Trevor LeRaye, review and investigations manager at mortgage insurance provider Genworth. "There was a lot of false documentation going on,” he says. "The developer ended up getting loan proceeds for at least the land content, which was very much over valued. Then he basically shot through and left all his borrowers with loans they clearly couldn’t afford.” New trends in fraud While LeRaye says the number of fraud cases has been “very consistent” over the past three years, the face of mortgage fraud is changing. Such cases are becoming less the focus of investigations as the industry improves its fraud prevention. “We’re fnding that there seems to be a shift from fraud for proft to fraud for shelter,” he says. In 2010, 29 per cent of cases Genworth investigated internally involved fraud for proft. By 2012, this category had fallen to 21 per cent. In the same period, investigations involving undisclosed debt rose from about 22 per cent to 49 per cent – what LeRaye calls “a fairly big swing”. "We've seen some fairly massive ‘forgetfulness’. I recall a fle where they had about $75,000 worth of credit cards they had simply forgotten to tell us about.” Document anomalies Other common types of misrepresentation include issues relating to employment, such as income and time of tenure, says Debbie McKenzie, senior manager, investments, at QBE LMI. False documents, such as bank statements, or the manipulation of identifcation documents, can also be used to commit mortgage fraud. "The documents we see that contain the largest number of anomalies are payslips, bank statements and the loan applications themselves,” she says. "Graphic design software has allowed for the increased production and submission of high quality, authentically designed, falsifed documents to fy well under the radar. Documents such as licence and ID documents, tax returns, fnancial statements, deposit verifcation and credit reports are all diffcult to detect.” Insurers can detail some of the telltale signs that should put lenders on the alert. Often the liability statement on the application for m has a massive mismatch with credit bureau enquiries, says LeRaye. "The person's savings statements may have a lot of regular direct debits going to fnancial institutions, but you can't see anything on the liabilities side We've seen some fairly massive 'forgetfulness'. I recall a le where they had about $75,000 worth of credit cards they had simply forgotten to tell us about. Trevor LeRaye, Genworth 32 Connexus Insurance