Due Diligence Required: 3 Techniques to Avoid Mortgage Broker Fraud
The mortgage broking industry is very unique in a number of ways. Firstly, not many industries operate within an environment where an error in judgement can result in the immediate end to your career.
Let’s not be confused by “error in judgement”; if a mortgage broker is directly or indirectly involved in fraud or misconduct, they must be terminated and removed from the industry.
Fraud by a mortgage broker has a significant negative affect on the industry, and as an aggregator, you have an obligation to act.
However, in recent times there have been an increased number of mortgage brokers caught up in fraudulent conduct whereby introducers or borrowers have doctored documents and the broker is totally unaware.
Let’s make it clear, ignorance is no excuse and you will lose accreditations, and intimately, your ability to work in the industry ever again.
Mortgage Broker Fraud
Before we understand how, as a mortgage broker, you can avoid fraud and avoid termination from the industry, there are 2 types of fraud to uncover.
Firstly, Fraud for Profit is where industry professionals misrepresent, misstate, or omit pertinent details about their clients’. On the other hand, Fraud for Housing occurs when the borrower actually omits or misrepresents pertinent details about their income, employment, credit and debt, or a property’s condition or value.
Avoiding Mortgage Broker Fraud: 3 Techniques
Before you start a referral relationship with another business or individual, check, recheck and check again all you can about this source.
There are an increasing number of dishonest referral sources targeting mortgage brokers with the promise of financial rewards and endless applications.
Furthermore, there is an increase in terminated brokers seeking joint venture arrangements with legitimate mortgage brokers ultimately ending their careers.
So, what can you do?
- Always ask your clients to send you their credit file, even if the bank completes one on your behalf after submission. This will give you an idea of what debts your client may have and is an important risk assessment tool to avoid devastating impacts on your business. Secondly, it increases your integrity and relationship with the bank by providing all liability information upfront.
- Always ask to see at least 6-months’ worth of your clients bank statements, even if the bank does not require this. Bank statements are a way to track your client’s income and expenses. This is to establish proof of income and ability to save. This is also to ensure that your client can be trusted by the lender with the loan amount, and to ensure that borrowers have enough money to meet the loan obligations.
- Get assistance from our range of extensive tools and resources to help you and your business. At Vision Aggregation, we have the expertise to ensure that you are operating ethically and diligently, to avoid any fraudulent activity by yourself or your borrower. Contact Vision today so that we can help you!
Every mortgage broking aggregator is thoroughly investigating any potential links to terminated mortgage brokers, fraudulent referral sources and shadow broker setups. It is not a matter of “If”, it’s a matter of “when”. When will those setups be uncovered?
The vast majority of the mortgage broker community are hardworking legitimate businesses with the small 1% putting the rest at risk.
It’s time FBAA and the MFAA got better at identifying these groups and individuals and getting rid of them for good.
The message is loud and clear; be cautious. Be diligent. And if in doubt, don’t.
Vision Aggregation are committed to protecting our key mortgage brokers. We want you to succeed, and we have your best interests at heart. If you have any questions or need any help with your current investigation techniques, please call Vision today.
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