doing the right thing account numbers is usually found on the 1003 when the borrower discloses credit information or when the borrower has account information and uses the account number as a bogus phone number (this activity is very rare); or O Failure to provide additional documentation for vetting or re-verification (the processor/loan officer will discover this while building the loan).
Unusual use of, or suspicious activity related to, the covered account When the credit report is pulled during pre-approval, many of the Red Flags can be detected, but a second credit report is often pulled the day of closing to monitor suspicious account activity. The mortgage professional who is underwriting and funding loans may want to practice ordering a credit report the day of closing.
Receive a request of new, additional, or replacement cell phone It is a Red Flag when the borrower is difficult to contact because of a misplaced cell phone or using a relative or friend’s phone.
Available credit is used for cash advances or large withdrawals
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KENTUCKY MORTGAGE PROFESSIONAL MAGAZINE
O www.NationalMortgageProfessional.com
This will be detected with a second credit report the day of closing or funding.
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Covered account used in a manner that is not consistent with established patterns of activity Suspicious credit activity will be detected the day of closing or funding when a second credit report is pulled. For the majority of brokers, good Red Flag Rules practices, such as analyzing the credit report and close examination of the applicant’s identification will meet the Federal Trade Commission’s (FTC’s) standards for Red Flag Rules compliance. However, the larger the mortgage operation, the more of the 26 Red Flag Rules will apply, such as income verification checks with the IRS, and Social Security Administration reports and Death Master File checks, as well as a final credit report pulled the day of funding. Most mortgage professionals have been practicing these procedures for years. All that is left is capturing internal practices and procedures in written form and to have them approved by the principals. Create some type of checklist that can be placed in each file so the state examiners, agencies, investors and
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lender can see that the Red Flag Rules are checked and signed off by a mortgage professional. Implementation of Red Flag Rules compliance is easy. The FTC has not created anything new … it has just borrowed compliance standard operating procedures from existing financial institutions and expanded them to other financial entities. Conscious mortgage professionals may want to consider expanding beyond the 26 Red Flag Rules checklist by using Freddie Mac’s “Discover Gold Through Quality, Fraud Prevention Best Practices, Chapter 2” (located online at www.freddiemac.com/dgtq). I will agree that a mortgage professional has a responsibility to prevent a stolen identity from being used for the purchase of a home, but that same mortgage professional also has a responsibility to protect and prevent a client’s identity from either being stolen or compromised. It is a matter of time before all mortgage professionals will be inspected on data and non-public information security and protection. I encourage all mortgage professionals to begin putting plans and policies together to address the protection and safeguarding of client’s non-public information, while working on the Red Flag Rules program. MARI’s 2008 “Eleventh Periodic Mortgage Fraud Case Report” shows that identity theft was the type of mortgage fraud least performed, compared to 64 percent in the “General Application Misrepresentation” category and an average of 29 percent “1Q3Q 2008 Tax Return and/or Financial Statement Misrepresentation” category. I believe the reason identity theft is extremely low compared to other fraud types is because the mortgage professionals are taking Red Flag Rules precautions and are doing a good job of it. The lenders are using pre-funding QC and pre-funding fraud prevention tools that are detecting suspicious activities, which are preventing loans from closing using a stolen identity. With all the bad press mortgage professionals have received in the media, I am excited to see that identity theft ranked the lowest of all fraud classifications and we have all of you to thank because you were doing the right thing and didn’t even know it. Tommy A. Duncan is executive vice president of Quality Mortgage Services LLC. He may be reached by phone at (615) 591-2528, ext. 124 or e-mail taduncan@qcmortgage.com. Visit author Tommy A. Duncan’s Quality Mortgage Services LLC Web site at www.qualitymortgageservices.com for more information on quality control programs and compliance solutions.
heard on the street
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can launch an appraisal order with the push of a button from within their loan origination system,” said Tony Ebeyer, StreetLinks’ COO. “This will reduce processing time and eliminate errors inherent in duplicate entry. We look forward to providing Encompass users with easy access to our industry leading, fully compliant appraisal solution.” Tom Hurst, StreetLinks’ SVP, said, “We are very excited to be partnered with the market share leader in loan origination software. Our focus on service, technology and quality will provide an ideal solution for Encompass users. We provide a full suite of valuation tools that are compliant with HVCC and all other state and federal regulations.” For more information, visit www.streetlinks.com or www.elliemae.com.
Lend America receives H4H approval and launches new site Lend America, a direct-to-consumer Federal Housing Administration (FHA) lender, has announced that the company has been officially informed by the U.S Department of Housing and Urban Development (HUD) that they have satisfactorily completed the pre-closing review period of the Direct Endorsement HOPE for Homeowners (H4H) program. Lend America may now begin to underwrite, close and insure H4H loan transactions without prior HUD review. The government’s Hope for Homeowners initiative allows lenders to refinance current or delinquent borrowers provided that the first lien holder of the loan writes the loan down to less than the current home value and waives any late fees or pre-payment penalties. The FHA insures the new loan and subordinate lien holders get a share in future appreciation of the loan. “As the approval letter states, participation in the Lender Insurance Program is a privilege accorded only to mortgagees who continue to demonstrate the ability to originate mortgage loans in accordance with HUD underwriting policy,” said Michael Ashley, chief business strategist of Lend America. “We are very proud to be amongst the first to receive this approval. Despite some early obstacles with the H4H program, Lend America did not abandon this important solution to the housing crisis, but has taken a leadership role and is committed to saving 10,000 homeowners from foreclosure and allows families to remain in their homes on affordable terms. We may have to extend our timeline, but this mission to Lend America is extremely important, and with HUD’s approval, we are moving full speed ahead to save one homeowner at a time.” Lend America also announced the launch of a new Web site, www.refiportfilio.com, for its institutional mortgage
solution, Maximum Principal Recapture Program, that allows institutional investors to quickly monetize their residential mortgage portfolios. The focus of this platform is to help institutional holders of mortgage portfolios, including hedge funds, investment banks and loan servicers to use refinancing options, including the H4H program, to quickly monetize their distressed residential mortgage portfolios, maximize cash flow and have a profitable exit strategy. “Lend America is already working with some of the largest institutional holders of mortgage portfolios to identify individual mortgages within the bundled loans that are in or close to foreclosure,” said Nick Bratsafolis, senior managing director of structured refinance at Lend America. “Once the loans have been identified by Lend America’s proprietary residential loan analytics technology called Metamorphosis, our teams of 400-plus mortgage specialists are reaching out to homeowners to begin and successfully complete the refinancing process.” For more information, visit www.lendamerica.com.
Mavent and QuestSoft alliance assists in secondary market demands QuestSoft, a provider of mortgage compliance software and services, has announced a partnership with Mavent Inc., a provider of automated compliance solutions for the financial services industry, to address regulatory changes in the lending process, specifically those impacting the secondary market. The partnership will pair QuestSoft’s Compliance EAGLE with Mavent’s rulesbased enterprise application as part of an end-to-end compliance solution that identifies regulatory exceptions throughout the origination life cycle for improved loan quality. Increased focus by secondary market investors on compliance have led to integration improvements, so correspondent sellers can access extensive compliance reviews from QuestSoft and Mavent on one platform. “The current dislocation in the mortgage market, onslaught of stricter regulatory requirements and budgetary constraints makes an effective automated compliance solution more critical than ever before,” said Louis Pizante, chief executive officer of Mavent. “Manual compliance is bulky and carries with it great potential for material errors. Maintaining a proprietary system is costly. Relying on a mediocre vendor in today’s chaotic environment will prove even more costly. Mavent provides lenders the same cost-effective, independent, loan-level compliance review continued on page 26