Page 40

downturn in the market, FCS has still experienced six percent growth from last year. This is a testament to the fact that their corporate culture is in and of itself the best loss mitigation tool. After interviewing a number of people in the organization from the top executives, to operations staff and sales people, these are the 10 qualities that I believe represent the corporate culture at FCS: O O O O O O O O O O

Strong relationships with clients Prudent underwriting Servicing the loans originated Staff training Loan officer accountability Compensation structure Selective TPO relationships Clients’ future dependence on loans Connection to the land The quality of the people they hire

You can see how much we can learn from my friends at FCS. And when you look at the history of FHA and the economic circumstances under which it

started, you will find the same core qualities. I am pleased with the direction Commissioner David Stevens seems to be taking the FHA, I only hope that he and his staff not to forget the roots of FHA, thus turning it into just another “GSE.” FHA is about giving creditworthy Americans a chance at homeownership, and it’s FHA’s responsibility to put the systems in place to make that happen. Go FHA! Jeff Mifsud founded Southfield, Mich.based Mortgage Seminars LLC in 2004, has been an FHA originator for 12 years, is a contributor to and is a former FHA underwriter. Jeff may be reached at (877) 342-9100 or e-mail Visit author Jeff Mifsud’s Web site at for tips and information on FHA loans and details from some of the nation’s top FHA specialists.

How Do You and Your Company Combat Fraud?




By Tommy A. Duncan, CMT


Being that my company, Quality Mortgage Services LLC, is a compliance company, we help many mortgage companies combat fraud. The first thing that a company must have in place is a commitment to combating fraud or what we call the “Attitude” which emanates from the company’s leadership and trickles down. When a company has the commitment to of zero tolerance for scrupulous deals, all the team members will be on board to combat fraud. Many mortgage companies only take their Quality Control (QC) Plan as the tool to receive Federal Housing Administration (FHA), Fannie Mae or Freddie Mac approval. The QC Plan is more than a check the block for correspondent or mortgagee approval … it is the company’s written policy on quality production. Other mortgage companies have combined their Home Valuation Code of Conduct (HVCC) QC Plan and Red Flag Rules as appendices with their QC Plan. This a great process of using the Red Flag Rules as a pre-funding QC Plan to detect fraud prior to closing and using the HVCC QC Plan as a collateral QC Plan. Training is another way our clients are combating fraud. We audit a number of fraudulent mortgage files and we ask, “How did this get through?” We base this on training. Having a trained set of eyes that knows how to recognize fraud helps

strengthen the quality of loans. Several months ago, we conducted training for a group of new QC auditors. After the initial test case, we gave the new auditors a set of live files to audit. We had not prescreened the files prior to the assignment, and we discovered a number of digitallyaltered documents of bank statements produced either by the loan officer or the borrower. The electronically-altered documents raised several red flags. The fax date stamp did not align with the Internet printed document. The fonts on the bank statement were not an exact fit. The kicker was when the withdrawals and deposits did not calculate with the available balance on the bank statement. The fraudster did not reconcile the statement. Why didn’t the processor or underwriter detect this? Fraud for housing is one of the most common types of fraud and rarely prosecuted. However, the mortgage company had internal problems and the company has deviant and/or untrained personnel who are gullible. There are a number of fraud detection course out there and many of them provide a certification at the conclusion of the course. Also, Campus MBA offers a number of course for underwriters and compliance personnel. Having qualified staff trained in fraud detection is the best way to com-

bat fraud and having fraud detection tools as a resource is good as well, but too many mortgage professionals rely on them to a great degree than the people who have the ability to reach beyond data models into asymmetrical analysis.

tax transcript service because Social Security, addresses, income and past employment, along with many other things, can be validated. It is my opinion that the tax transcript is the best technology solution for fraud detection prior to funding.

What systems do you have in place to What sort of job has the industry done spot the red flags of fraud? to police itself and combat fraud? Seasoned and experienced staffs that know I think the industry is doing a good job but it the mortgage process and software called could do better. One of the things it has done Mortgage Analysis Review Software (MARS), well is the requirement of licensing of loan which guides the end user through the originators. I was happy to see the recent loan as they analyze the loan. MARS is Federal Deposit Insurance Corporation mostly data entry, but (FDIC) requirement for loan through the data entry, the officers who work for banks end user applies their fraud to be held to the same standetection experiences and dards as non-banks. Fannie analyzes the loan. This Mae’s recent announcement method has proven sucabout having another 4506-T cessful when applying signed at closing to verify or asymmetrical analysis that re-verify tax transcripts is yet is not data model driven. another positive step in eradAsymmetrical analysis is the icating fraud at the closing ability to analyze nontable. Training of the Federal measurable red flags, like Bureau of Investigations (FBI) association and link analystaff in mortgage fraud “Things that the sis, that is not measured investigation and advancing through data, or discern- industry could do betthe technology of the U.S. ter is to police itself ment of actions for discernDepartment of Housing & include the prevention Urban Development (HUD) ment of actions not taken. of executives of fraud- so that it can be equal to the What technologies are large lenders as per training ulent mortgage comavailable to combat fraud? panies from ever open- and technology, are another I have clients from supering another operation two good things being done vised wholesale lenders to in the combating of fraud. … the virtual non-supervised loan corre- “phoenix” going down Enforcing existing appraisal spondents and I have seen policies through the Home in flames and then about every type of fraud Valuation Code of Conduct coming back to life.” detection tool out there, (HVCC) has improved the from document compliquality of loans by 16 perance vendors, credit bureau services, auto- cent according to Fannie Mae. Something as mated valuation model (AVM) products, simple as changing underwriting requirecompliance software checklists and data ments has deterred fraud as well. services. For some reason, regardless of The Mortgage Bankers Association the technologies available, mortgage (MBA) is extremely proactive in working fraud keeps increasing. As more technolo- with industry professionals and vendors gy keeps surfacing the more fraud preven- in communicating actions on Capitol Hill tion data systems and tools become avail- and going back to the professional and able. As far as I know, the industry has not getting feedback on what works and what been able to track the success of mortgage needs improvement. In 2009, MBA had fraud detection, but it can track mortgage several conferences, such as the Fraud, fraud cases. Therefore, with all the tech- Quality Assurance and Residential nologies available for detecting fraud, the Underwriting, Legal and Regulatory, and industry is unable to measure the success of course, their national conference of the technology tool available. where committees met to discuss compliWhen a loan goes into default, we need ance and fraud and what the industry can to know the reason or reasons why. There is do to improve in the department of polino technology available to do this. It is a cies, procedures, technology and lobbying manual audit and it is a human being, not to police the industry. The MBA has lissoftware or a great database, that discovers tened to the voice of the mortgage profesthe fraud. The problem is that, in many sionals who work directly with mortgage fraud cases, technology was used to screen compliance and mortgage fraud and has the loan for fraud, because the mortgage coordinated their unified efforts. professionals who used the tools were not skilled enough to detect the fraud, except Do you feel more legislation is neceswhen the loan arrives at the QC profession- sary to fight fraud? al for audit for fraud. I know that many I do not think the industry needs any technological tools are available to detect more legislation. The industry can place fraud, however, one of the best tools is the policies on itself in order to improve its