“You have documents like pay stubs and bank statements where you’re able to look at mailing addresses and see whether something lines up from that perspective,” Seguin said. “Or, is renters insurance showing on the hazard policy when you wouldn’t expect it to be. There are more red flags that could be identified on a refi than on a purchase.”
With the FHFA cracking down on fraud, Seguin said they have an easier job than brokers because they get to look at the loan months later. At that point, it is much easier to spot fraud, especially occupancy fraud.
“They are challenging for the originator, compared to Fannie or Freddie, who look at it 120 days later,” he said. “If they never change their mailing address or the service, or Fannie and Freddie Google the property and find it listed for rent. They have it a little easier from that aspect than the originator does.”
AI versus AI
Another factor leading to an increase in fraud is macroeconomic conditions. Affordability challenges, especially with the rise in property taxes and insurance, are making fraud seem more appealing to some borrowers.
“The real estate market in general, a lot of those other factors that are out there that are starting to potentially be contributors to fraud,” Seguin said. “You have certain areas of the country with negative or slowing housing price growth. Property taxes and property insurance are increasing. And that’s making it tougher for the homeowner.
