Rise in mobile and online home purchases fuel mortgage fraud

The increase in mortgage fraud over the past three years was largely due to an increase in online and mobile-only mortgage transactions. The pandemic and the growth of the mobile channel has fueled the number of fraud cases, with app fraud a key entry point for fraudsters, according to a new report analyzing fraud trends.

According to LexisNexis Risk Solutions. According to the company’s True Cost of Fraud report, businesses with 50% or more retail transactions could have a higher fraud cost and higher average monthly attack volume.

The report surveyed 360 risk and fraud managers to analyze fraud trends in the mortgage originator, service, securities and settlement markets.

For originators, managers, securities and settlement companies, the cost and volume of mortgage loan fraud has been high, costing depositary originators or mortgage companies the most. Every dollar of fraud costs them $5.34 and non-custodial originators $4.66, according to LexisNexis Risk Solutions.

Across all segments, including custodial originators and non-custodial originators, more than half of transactions were conducted through online and mobile channels, which accounted for the majority of fraud costs.

Mortgage originators, managers, and securities and settlement firms identified identity verification as the biggest challenge with mortgage loan fraud. Difficulties in assessing digital identity attributes such as email and phone numbers have contributed to issues such as distinguishing between legitimate and bogus consumers, the report notes.

“Although the future is uncertain, it is reasonable to assume that the accelerated movement towards online and mobile transactions will continue to grow and that mortgage originators, managers and securities and settlement companies should develop and improve digital customer experience while protecting against fraud,” said Dawn Hill, director of real estate fraud and identity strategy at LexisNexis Risk Solutions.

According to the report, a multi-layered solutions approach integrated into cybersecurity and digital customer experience operations has shown that companies can reduce fraud and the costs that come with it. Integrating fraud prevention with cybersecurity operations throughout the digital customer experience and layering artificial intelligence and machine learning were recommended as ways to strengthen fraud prevention.

“A successful approach to fraud detection and prevention involves integrating technology, cybersecurity and digital experience operations in a way that addresses the unique risks of different transaction channels and payment methods, as well as by individuals and types of transactions,” Hill added.

A growing number of companies have focused on deterring fraud in the real estate market. More recently, CertificateIDa platform that validates the parties involved in a real estate transaction, received $12.5 million in a Series A funding round led by Arthur Ventures. The company aims to launch a solution to prevent fraud in mortgage repayments through funds. CerifID, which has more than 30,000 monthly users, offers up to $1 million in insurance coverage for each transaction. The company has had no insurance claims so far, according to CerifID.

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