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New Integration Seeks To Stop Fraud And Enhance Risk Mitigation

PathSoftware, a loan origination software (LOS) from CalyxSoftware, has integrated with First American Mortgage Solutions’ FraudGuard, a data-driven decision-support tool that increases the speed and accuracy of application reviews to help mitigate risk and improve loan quality. The tool leverages advanced analytics, reporting, defect trending and audit trails, drawing on public, private and proprietary data sources garnered from over 28 million reviewed loans.

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The DirectConnect integration enables PathSoftware users to seamlessly access FraudGuard without having to leave the LOS and run automated decision support services that provide critical data insights. This helps residential lenders, including credit unions, streamline operations and become more efficient through process and workflow automation, data aggregation and risk analysis. In addition, it gives lenders the confidence that they are originating compliant loans, which in turn allows them to provide homebuyers with a quicker loan approval and a better consumer experience.

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“We’re thrilled to be the first risk mitigation provider to integrate with the PathSoftware LOS,” said Kevin Wall, President of First American Mortgage Solutions. “FraudGuard is designed to improve loan quality, and the more we can do to give lenders the convenience and confidence to quickly produce higher quality loans, the better the experience and outcome for everyone, including consumers.”

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“In today’s highly regulated mortgage environment, lenders need to prove they’re originating loans to the highest quality standards,” said Bob Dougherty, Vice President of Business Development at PathSoftware. “Our integration with First American Mortgage Solutions’ FraudGuard will help lenders identify potential fraud risk in mortgage applications, giving them the confidence that they’re complying with regulations.”

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Integration Seeks To Increase Loan Quality

First American Mortgage Solutions, LLC, a subsidiary of First American Financial Corporation (FAF) and provider of lender and servicer solutions that cover the entire loan spectrum, completed its integration with LoanLogics, a provider of loan quality management and performance analytics. The integration provides users of LoanLogics’ LoanHD platform with streamlined access to FraudGuard, First American’s data-driven decision-support tool that helps lenders comply with regulations, improve the speed and efficiency of application reviews, and increase loan quality.

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The LoanHD platform, LoanLogics’ flagship loan quality management technology, offers real-time loan quality reporting and best practice audit workflows. From within the LoanHD platform, users can now order FraudGuard services directly from the AppQ Network vendor management portal, which provides lenders with easy access to an entire ecosystem of third-party services that create efficiency and reduce errors in the audit lifecycle.

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“LoanLogics is committed to ensuring our clients have the tools they need, when they need them,” said Craig Riddell, senior vice president and chief business officer for LoanLogics. “By continually expanding our LoanHD network with the addition of best-of-breed solutions like FraudGuard, we’re helping our clients drive toward zero defects, improve their loan manufacturing process and reduce cost, while increasing the efficiency of audit reviews through technology and automation.

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FraudGuard is First American’s comprehensive decision-support tool that helps lenders originate compliant, defect-free loans using a combination of superior data, pattern-matching analytics and industry experience garnered from over 28 million reviewed loans. The next-generation data validation tool draws on public, private and proprietary data sources to deliver analytics that help lenders mitigate risk and accelerate the loan application review process.

“FraudGuard’s unparalleled data assets make it a stand-out among loan quality management tools,” said Kevin Wall, president of First American Mortgage Solutions. “We’re pleased to bring LoanLogics users on-demand access to the critical data insights and automated decision-support services they need to originate high-quality loans with confidence.”

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National Fraud Levels Decline, But Not In Florida

*National Fraud Level Declines, But Not In Florida*
**Interthinx Releases Report**

***Interthinx has released its quarterly Mortgage Fraud Risk Report covering data collected in the third quarter of 2012. According to the most recent analysis, overall risk nationwide has decreased by nearly 8 percent to the lowest value observed in the past two years. However, significantly increased levels of fraud risk in Florida pushed it past Nevada and into the top spot for overall fraud risk.

****Florida also appears on three of the four type-specific top 10 riskiest lists this quarter. Of particular concern is the finding that in Florida, investment purchases have more than three times the level of employment/income fraud risk than purchases for primary residences.

****Other notable findings include:

****>> Florida and Nevada are the two riskiest states with Interthinx Mortgage Fraud Risk Index values of 206 and 205, respectively. Currently, Florida has 17 metropolitan statistical areas (MSAs) classified as “very high risk.”

****>> Arizona is the third riskiest state for mortgage fraud, with a risk index value of 191.

****>> California, which is the fifth riskiest state in the country, has six of the top 10 riskiest metros, including Merced — the riskiest metro in the nation. California also has one of the 10 riskiest MSAs for identity fraud, three of the 10 riskiest MSAs for occupancy fraud, five of the 10 riskiest MSAs for property valuation fraud, and eight of the 10 riskiest MSAs for employment/income fraud.

****>> Iowa City, Iowa, leads the nation in identity fraud risk with an identity fraud risk index of 325, a 118.4 percent increase from the second quarter of 2012.

****>> Miami-Fort Lauderdale-Pompano Beach, Florida, appears on all of the type-specific top 10 riskiest lists except employment/income.

****“The report shows that even when overall fraud risk is decreasing nationwide, there are still areas of concern, as we see with this quarter’s findings in Florida,” stated Mike Zwerner, senior vice president of Interthinx. “The report’s actionable intelligence helps lenders pinpoint where additional due diligence may be needed, improves loan quality, reduces repurchase risk, and ultimately helps the economy recover.”

****The Mortgage Fraud Risk Report is an Interthinx information product created by an internal team of fraud experts. This is the fourteenth time Interthinx has released its quarterly report. The report provides deeper insight into current fraud trends through the analysis of more than 12 million loan applications amassed from the industry’s use of the Interthinx FraudGUARD loan-level fraud detection tool.

Progress In Lending
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Stay Ahead Of The Fraud Curve

*Stay Ahead Of The Fraud Curve*
**By Tony Garritano**

***Mortgage fraudsters are always evolving. As a result, lenders need to stay on their toes. To this end, Interthinx has announced October 8, 2012, as the “go live” date for FraudGUARD Evolution, advanced technology enhancements to FraudGUARD designed to increase operational speed, further workflow efficiency, and improve usability for mortgage lenders and investors. Here’s why this matters to lenders:

****With FraudGUARD Evolution, customers have access to the new dashboard and an enhanced alert model that categorizes and consolidates variances, allowing clients to identify the primary risk of a mortgage loan quickly and accurately. The new technology, which significantly affects user-experience by vastly improving review times, is now available for demonstration. Interthinx is taking appointments for the Mortgage Bankers Association’s 99th Annual Convention & Expo scheduled for October 21 through October 24 at the Hyatt Regency in Chicago, Illinois.

****“Lenders today feel a pressing need not only to integrate automated risk management systems but also to ensure that the systems prove to be robust, efficient, and easily navigable for the end user,” said Jim Portner, vice president of product for origination solutions at Interthinx. “A deficiency in any of these components can leave lenders and investors nonproficient and, worse yet, vulnerable. The FraudGUARD Evolution release complements the comprehensive Interthinx system by delivering features designed to eliminate redundancy; reduce loan underwriting time; and recognize borrower, participant, and property valuation risk swiftly.”

****FraudGUARD is a customizable, automated web-based tool that identifies risk and potential fraud in mortgage loans by using public, private, and proprietary data sources. It enables prefunding file review of borrower, collateral, and third-party information to help lenders clearly identify problematic loans and remain compliant. Emulating the most current fraud tactics based on massive Interthinx investigations and quality control reviews, specific models and search algorithms are quickly deployed to identify patterns and commonalities across extensive data sets to fill information gaps and update FraudGUARD scoring systems. Guidance and direct input from mortgage fraud experts with more than 350 years of combined experience are woven into the learned-behavior technology. FraudGUARD increases operational efficiencies and time savings through process and workflow automation, data aggregation, and risk analysis.

Tony Garritano
Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.

Fraud Detection Vendor Gets Security Seal

*Fraud Detection Vendor Gets Security Seal*
**By Tony Garritano**

***Do you want to end up in the papers having not secured your customer’s sensitive information? Of course not. That’s where technology comes in. For example, Interthinx has earned a National Institute of Standards and Technology (NIST) certification recommendation from SecureInfo for two of its automated products for the residential mortgage markets. Here’s what happened here:

****SecureInfo subjected both FraudGUARD and PredProtect to extensive review to determine that the products meet the stringent security requirements of the NIST. As part of its standard procedure, SecureInfo conducted interviews, examinations, tests, and vulnerability scan analyses to evaluate 115 NIST SP 800-53, Revision 3 controls and control enhancements.

****Mike Smith, chief technology officer and chief architect for Interthinx, stated, “We are particularly pleased that as an independent third party serving as an Agent of the Certification Authority, SecureInfo recommended that both FraudGUARD and PredProtect be issued an Authorization to Operate.”

****“Interthinx takes great pride in its security measures and stands ready to work with government agencies to help mitigate risks through improved data integrity and compliance,” said Kevin Coop, president of Interthinx.

****Interthinx, a Verisk Analytics subsidiary, is a national provider of risk mitigation solutions focusing on mortgage fraud, collateral risk and valuation, regulatory compliance, forensic loan audit services, loss mitigation, and loss forecasting. Interthinx offers predictive analytics to the residential mortgage industry.

Tony Garritano
Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.

Understanding The News: Fraud Is On The Rise Again

*Fraud Is On The Rise Again*
**The Trend Is Troubling**

***Interthinx has released its annual Mortgage Fraud Report, which highlights some of the most significant mortgage fraud risk trends based on analysis of loan applications processed in 2011. According to the report, the Employment/Income Fraud Risk Index rose 14 percent during 2011 and has been on an upward trend for more than two years for a total increase of more than 45 percent. The Employment/Income Fraud Risk Index is particularly high for investor loans with an index of 310, which is almost three times the overall index value of 111 and is highest for high-value properties.

****More detailed points highlighted by Interthinx analysts include the following:

****>> The fraud hot spots for 2011 are very similar to those observed in 2010. The top six states with the highest overall levels of mortgage fraud risk in 2010 were again the riskiest six states in 2011. Mortgage fraud risk remained consistent from 2010 to 2011 in the Metropolitan Statistical Areas (MSAs) as well, with 16 of the 20 riskiest MSAs repeated from the previous year. This alarming degree of persistence suggests that it is going to be a long road back for these MSAs and states. They are all experiencing high levels of foreclosure activity, and the predominant mortgage fraud schemes center on distressed borrowers and properties.

****>> Nevada has the highest mortgage fraud risk in the nation, with a risk index value at 245, which is 99 points higher than the national mortgage fraud risk index of 146. Over the last eight years, Nevada has experienced a cycle of fraud leading to an artificial boom followed by a devastating bust resulting in the largest house price declines, unemployment rates, and foreclosure rates in the nation. High fraud risk, associated in particular with foreclosure and short sale schemes, contributed to Nevada retaining its position as the state with the highest mortgage fraud risk in the country for the third consecutive year.

****>> The entire Chicago MSA saw a dramatic decrease in high-risk transactions in 2011, with its risk index value falling from 174 in the first quarter to 146 in the fourth quarter. Increased media and lender scrutiny of fraud in these geographies may have played a role in this dramatic change.

****>> Five of the six New England states experienced large changes in fraud risk between 2010 and 2011. Rhode Island, Massachusetts, and New Hampshire are among the four states with the largest risk decreases, while Vermont and Connecticut both experienced large increases in fraud risk. This dichotomy could be caused by the movement of fraudsters between neighboring regions as they identify areas ripe for exploitation. Maine remained in the five lowest-risk states.

****>> The rise in the Employment/Income Fraud Risk Index over the past two years is likely the result of the decline in house prices being outpaced by the decline in the income of working households combined with more stringent underwriting and documentation requirements.

****>> Loan applications for investment properties continue to have very high fraud risk compared with owner-occupied properties.

****“Keeping our guard up as risk profiles shift requires our industry to think as creatively as the criminals,” said Kevin Coop, president of Interthinx. “That’s only possible when lenders have access to the best data and analytics available. By identifying risky correlations, such as high employment/income fraud risk on loans to investors for high-value properties, or pinpointing geographic pockets of risk, we provide actionable intelligence that lenders can use to mitigate risk.”

Progress In Lending
The Place For Thought Leaders And Visionaries