Written By: Stacey Sprain
This week I dealt with something I never thought I would see with my own eyes. I’ve heard the stories, I’ve read the articles, I’ve done the research, I’ve been involved with auditing and still, I never thought I’d see it. This week I uncovered a fraud ring which involved straw buyers and interested-party connections that started with the referral source and ended with the settlement agent. And it may sound silly, but I feel violated.
It angers me to pieces that someone had the nerve to try and run these loans through our system- the system that we all work so darn hard to build and protect. It infuriates me that people have become so greedy, so hungry for money that they would take such risks to commit fraud with no regard for what it does to our business.
I’m angry not just for me, but for the founder of the company I work for who has spent so many years building his dream organization, for the hundreds of hard-working employees who slave and grind every day and deal with the demands and the stress of our business, I’m upset on behalf of the trainers and the organizations whose main focus is to educate all of us, I am absolutely livid for the legitimate homebuyers and homeowners whose property values are affected by these fraudulent borrowers, properties and values. I am frustrated that something I never thought I would see was right there in front of me! But I am damn proud to be a person who was able to recognize the red flags, pose the questions and stop these loans from getting through our system!
I cannot stress enough the importance of paying close attention to detail in each and every loan file that crosses your desk. A few things I try to watch for on every loan so I am able to catch potential misrepresentation:
• Always pay attention to the detail within the credit report. Don’t just go straight to the fico scores and tradelines. Take a look at the reported address history, the employment history and the inquiries. If the address history doesn’t make sense with the address history the borrower has listed on the 1003, take a look at the pay stubs, W2s and bank statements in the file. Are there inconsistencies? What about the address on the drivers license? If you have any concern, try doing a reverse address search at www.411.com. If that doesn’t confirm that the borrower resides at the stated address, try validating the address with www.usps.com.
On one particular loan file, I suspected an immediate straw buyer when I noticed the address listed on the 1003 where the borrower indicated living for 4 years wasn’t listed in the address history on the credit report. I immediately went to www.411.com and tried a reverse address search. When I entered the address, I received a message validating the address wasn’t found. Next I moved on towww.usps.com and attempted to verify the address there. I found that the street existed but that all house numbers on the street contained 5 digits. The 1003 residence address and the borrower mailing address that appeared on all bank statements and pay stubs contained only 4 digits. It was at that point I suspected that I had a potential straw borrower along with manufactured pay stubs, W2s and bank statements.
In addition, this particular borrower had provided an illegible photo in the copy of his identification. And the id provided was from a state where the address history showed the borrower has never been reported to live. This furthered my suspicions.
• This file also included a relocation letter stating that the borrower was being relocation with his employer from one state to another. It didn’t mention any starting salary and there were grammatical errors within the letter. I also compared the type in the letter and found it to be very consistent with the type of the supposed pay stubs and the offer to purchase for the subject property. I turned again towww.411.com And tried to find a listing for the business in the city the relocation letter stated the borrower was being transferred to. No listing was found.
• Another clue was the offer to purchase agreement. It was not on a standard state realtor association form but rather a created form. The signature of the seller was not legible and there was no individual’s name typed or printed to provide identification. The seller was an LLC. I was able to confirm the LLC was registered with the state, but was not able to confirm who signed on behalf of that LLC.
The amazing thing on this situation was the blatant nerve of this perpetrator. I recognized the name of the LLC as soon as I identified the selling party- I’d seen it before. When I traced back I was able to identify that a borrower with the exact same name has applied for a loan to purchase the exact same property only a few short months before this attempt. How stupid, right?
I immediately requested this loan be stopped and took a list of my questions and concerns back to the processor and originator. I informed them there was absolutely no way we were allowing this loan but I wanted to see the reaction I would get from my list. As I anticipated, as soon as the list of questions was presented to the parties involved, the originator received an email sent from one of the parties on behalf of the borrower that he was no longer interested in doing business with us.
In the meantime, I had requested that the processor use the signed 4506-t to request tax transcripts from the IRS. As I had suspected they would, they came back validating that no tax returns had been filed under that social security number or borrower in the previous two years. It was then that I was 100% certain I had uncovered a straw buyer and a ring of fraudulent parties. I had all the evidence we needed to officially declare misrepresentation and fraud.
I am hoping my story might help some of you to pay close attention to the details within each loan file and to take the additional time to validate and verify exactly who you are dealing with on each transaction. The four deals I went on to tie to this ring saved our company close to $500,000 in fraudulent loans. To me, it’s been a week of work well-spent!
About The Author
Stacey Sprain - As an NAMP® staff writer, Ms. Stacey Sprain is currently a NAMP® member in good standing, and is a NAMP® Certified Ambassador Loan Processor (NAMP®-CALP). With over 15+ years of mortgage banking experience, Stacey is also a Quality Control Manager for a major mortgage lending institution. If you would like to become a volunteer writer for us, please email us at: email@example.com.