Brokers need to know their clients, says insurer

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Mortgage brokers can help fight fraud by checking their client’s backgrounds, says a title insurance provider, which investigates $120,000 of suspected mortgage and title fraud every day.

“Since 2009, the fraud‐detecting experts in our underwriting department have uncovered indications of potential fraud valued at over $100 million in residential mortgages and real estate transactions from all sources,” Eric Haslett, FCT’s vice‐president legal, claims and chief underwriter told MortgageBrokerNews. “Recently, we identified two suspicious transactions which had a combined value of over $1.1 million within a three‐day period alone.”

The latest CAAMP-Maritz report indicated lenders and banks considered fraud one of their leading concerns about dealing with brokers – a perennial worry mortgage professionals largely view as unwarranted.

Haslett says some simple steps can help brokers ensure their clients are genuine. He recommends brokers get to know their clients, including why they picked a specific broker or company and who referred them. It is also a good idea to check details on identification and credit bureau reports to ensure the information is consistent, and the client is familiar with the details.

He also offers two warning signs: if the mortgage amount is significantly higher than the property value or if there seems to be a rush to closing.

“If there is no clear reason why the client wants to close the deal ASAP and the client does not seem overly interested in shopping around for the best mortgage it may be an indication that they have other interests in the deal closing fast,” he said.

In a recent case FCT underwriters flagged a $675,000 mortgage and purchase transaction when they found the address of the borrower’s driver licence was a vacant lot; the signature on the licence did not match the signature on some of the agreement documents; and the height of the purchaser on his citizenship card was seven centimetres taller than on his driver’s licence.

In February Mortgage Broker News reported Equifax Canada’s figures showing mortgage fraud had the greatest dollar value of fraud activity at more than $400 million.

"This staggering dollar figure illustrates the need for continued vigilance by financial institutions to reduce this threat to both consumers and lenders," said Equifax vice-president, legal counsel John Russo.

  • Vas Anton on 2012-03-10 5:45:57 AM

    The way the article is written seems to suggest that banks are being victims of fraud solely through the broker channel... From the title ("Brokers need to know their clients, says insurer") and throughout the articles - "Mortgage brokers can help fight fraud", "simple steps can help brokers ensure their clients are genuine", "He recommends brokers get to know their clients" - the author makes it look like fraud is only being perpetrated upon the unsuspecting banks *ONLY* through the broker channel...

    I would have preferred if the authour would have said "the mortgage specialist needs to..."... If I remember correctly, there were a couple of fraud cases, settled just recently, that were perpetrated through banks' branch channels or through their internal mortgage sales force...

    This could have been a good article, if only the author would have used the more general term...

    Vas Anton
    Excel Mortgage Canada

  • Ron Butler on 2012-03-10 7:29:47 AM

    Well said Vas, while I agree that brokers MUST apply due diligence to knowing who their clients are; after 16 years I have seen 10 times the amount of fraud for profit from bad lawyers and bad realtors than from mortgage brokers.

  • Stan Olech on 2012-03-13 3:58:34 AM

    Amen to it Ron & Vas

  • Michelle W on 2012-03-15 2:53:56 AM

    Ron and Vas (to a certain extent) - You are both correct.

    However, I'd like to point out that this article is specifically focusing on Brokers because the "CAAMP-Maritz report indicated lenders and banks considered fraud one of their leading concerns about dealing with brokers".

    This is specifically why the author isn't branching off to all the other lawyers, specialists, etc. and instead is focusing specifically on Brokers. Make sense?

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