In separate interviews, mortgage fraud attorney Tom Maxwell and Marcus Vander Wall, a program officer with the National Credit Union Administration's (NCUA) Examination and Insurance Division, offer tips for detecting and deterring scams.
Maxwell, a partner in Barnes & Thornburg Business, Tax & Real Estate Department, says reforms to the SAFE Act now include national registration for loan brokers and originators. That national registration will help states better identify potentially crooked mortgage lenders who travel from state to state to acquire broker licenses. The reforms also require that loan originators maintain a higher percentage of the loans they originate, putting self-interest in the system.
"The loan originator has skin in the game," which puts more lending onus on the originator, Maxwell says.
Working with third-parties also poses risks, as the Farkas case proved. Underwriting guidelines and redundancy in the system play key roles, especially when a financial institution repeatedly works with the same broker.
"You have to have people looking over shoulders so you don't have one person overseeing everything," Maxwell says.
During his interview, Maxwell discusses:
- Steps banks and credit unions can take to prevent mortgage fraud;
- Internal controls they should implement;
- The role reform may play in fighting fraud.
Vander Wall says that heightened oversight is a must for most mortgage transactions. Fortunately, for credit unions, which often deal in basic retail mortgage transactions, the risk of mortgage fraud is lessened. Also, since most credit unions lend locally, it's easier for them to spot an inflated or deflated property value, because they know the region.
"The more you rely on third parties, the greater the risk," Vander Wall says.
During his interview, Vander Wall discusses:
- Steps the NCUA is taking to help credit unions share best practices for mortgage fraud prevention;
- Why due diligence is necessary when working with third-party lenders.