Mortgage Fraud Analytics

Basepoint has recently launched two new services (Enhanced Fraud Review and Fraud Organizational Framework) which are designed to help eliminate mortgage fraud for originators. Both services will help identify and prevent the funding and purchase of fraudulent loans by incorporating proven best practices into the loan review process. According the to Tim Grace, president and CEO of Basepoint,

“The concept of Enhanced Fraud Review is simple. BasePoint helps companies pin-point those mortgage loans where fraudulent misrepresentations are most likely to exist using our market leading FraudMark™ scoring solutions. Then, using the Enhanced Fraud Review, we guide lenders and due diligence companies through an intelligent process for investigating those high risk applications, vetting out the actual misrepresentations and thus preventing fraud from slipping through. The guided process takes place in the form of an intelligent checklist that an underwriter completes, and which can dynamically adjust according to the underlying risk and information in the application itself.

The second service, Fraud Organization Framework, facilitates improved risk and fraud management systemically. Lenders and investment banks are focused now more than ever on controlling credit and fraud risk. Investment banks are implementing FraudMark™ scoring before sampling for due diligence and using Enhanced Fraud Review at their due diligence companies for each loan trade. To ensure that fraudulent loans never reach the point of purchase, lenders are implementing organizational structures that ensure higher quality loans are ultimately funded before being sold on the secondary market.

Using BasePoint’s service to define new risk management organizational structures, lenders can accelerate their success in minimizing fraud and risk. For investment banks, this service recommends the structure and staffing of the due diligence fraud review process. BasePoint’s new Fraud Organizational Framework is based on best practices in fraud management from within the mortgage industry as well as other areas of financial services including highly advanced organizational practices that have been developed in the credit card industry over the past two decades. BasePoint fraud consultants work with clients to design, introduce, and implement the right fraud management processes to achieve each organization’s fraud and risk management goals."

While Basepoint's software might be more effective than current measures (and in many cases far more effective) but the root case was the loose credit standards that epitomized this round of housing boom. On the other hand Basepoint analytics can help capture more subtle forms of fraud than simple income falsification. Mortgage fraud is often perpetuated by fairly sophisticated individuals who often practice it on a wide scale. This give originators a leg up on those individuals.

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