Fraud Prevention Best Practices for Mortgage Brokers

Posted on: August 12, 2016 by Newmark Insurance

As technology evolves, so do fraudulent schemes. Unfortunately, with a wide range of fraudulent activities, protecting your business can be a daunting task. Therefore, becoming educated on how to prevent these schemes is a necessity. With a robust risk management plan in place and secure controls, this threat can be minimized. Furthermore, as a first line of defense, ensure your company is secured with a comprehensive Mortgage Broker Professional Liability insurance policy.

Below are a few best practices for minimizing fraud within your mortgage broker firm:

  • Abide by all licensing and state regulations.
  • Create a detection procedure and create controls to minimize fraud.
  • Only accept financial documents and qualifying evidence directly from the borrower.
  • Credit reports, appraisals, and loan information should be verified by your firm. If these documents are submitted by third parties rather than the official borrower, verify their authenticity before signing off on them.
  • Only use appraisers who meet state requirements and who have a proven track record of success.
  • According to Freddie Mac, remember that you are accountable for the contents of a loan file, including:
    • The sources of and authenticity of all qualifying documentation.
    • Representations made on the loan application, such as occupancy, employment income, assets, equity contribution, etc.
    • Transaction representation. For example, if the loan is presented as a refinance, does the borrower currently own the property?

At NewMark Insurance Services, we understand the Professional Liability Risks faced by Mortgage Brokers and Lenders, as well as other professionals in the real estate industry. We also write all other liability products needed to operate your business. For more information, please contact us today at 855-777-6549.

Posted in: blog Mortgage Brokers