PERSON OF THE WEEK: Brent Chandler is founder and CEO of FormFree Holdings Corp., a provider of e-document and verification technology to the mortgage banking industry, including AccountChek, an investor-accepted, automated asset verification solution that collects, analyzes and certifies financial data. MortgageOrb recently interviewed Chandler to learn more about how the mortgage industry is dealing with the pesky problem that never seems to go away: mortgage fraud.
Q: Fraud is an ongoing problem in the mortgage industry, even with numerous cross checks of information. What do you see most fraudsters trying to get away with when trying to obtain a mortgage?
Chandler: According to CoreLogic, more than 60% of fraud is committed during the origination process – and the specific area that has seen the biggest overall increase in the last year is income fraud. Income can be falsified by manipulating bank statements and W2s, borrowing money from a private source to temporarily increase assets or even "borrowing" someone else's account information to qualify for a loan. It seems there is a new scheme and a new way to defraud the industry around every corner.
Q: Do you feel the industry is accurately addressing the issue of fraud? Where could it improve?
Chandler: I believe the industry is beginning to address the issue of fraud by considering the use of disparate third-party sources for the purpose of verification. Unfortunately, however, today's crooks are innovative. They are constantly finding new ways to commit fraud, even as the industry struggles to catch up on the known schemes. Loan files also pass through a lot of hands, so sometimes it is tough to even know who changed information and whether it was a mistake or intentionally done.
Digital processes that reduce the number of times the loan file has to pass through someone's hands will reduce the opportunity for tampering. Information should also be coming directly from the source, so you know the data is correct from the start.
Q: FormFree's AccountChek is a paperless, real-time way to check a borrower's assets. How does a paperless system help combat fraud with assets?
Chandler: Our data comes directly from the source, and by that, I mean that the bank itself is providing the information about the borrower's accounts, and we standardize the format and digitally sign the data for the lender. This guarantees that the borrower did not tamper with information and that the balances are current as of the day the reports were generated. This scenario even removes the need for quality control, because lenders don't have to double check the information being provided to them.
To make life easier on underwriters, we also provide reports that highlight deposits, average balances and suspicious behavior. The less calculation that has to be done by hand, the less chance there is for error.
Q: Because security breaches of personal information are a major concern these days, how is a digital process safer than manual for consumers and lenders?
Chandler: A couple of years ago, a reporter did an expose on industrial copiers, which have an internal storage device that saves copies of everything. When these copiers, which were often leased, changed hands, the complete history of everything copied would as well. That means copies of any paperwork, including W-2s with your social security number and address, your bank statements with all of your account numbers, and any other personal information were available to anyone who had the copier next. Copiers still work this way, and most people don't realize that copies of all their documents are being saved in a completely vulnerable way. Even if consumers are printing or faxing documents from home, they do not know what device is being used in the office where those documents are sent.
Not only that, but in most institutions, paper files are accessible by other staff, not just the person handling the loan. And while you hope that a) everyone there is trustworthy and has been through a background check, and b) outdated copies of information are destroyed properly, ultimately, you never know who has access to your physical file. However, with digital processes that are properly secured, only those individuals with authorized access can view and share a borrower's information, and you can more easily track where that information goes.
Q: Although it is difficult to have a completely paperless loan process, do you see many in the industry making a strong effort to move in this direction?
Chandler: Absolutely. Mortgage banks are very open to new technologies that will give them an edge in the marketplace. Paperless loan processes are proving to be faster and more convenient for the borrower, and they ultimately increase the amount of volume that can be processed by the lender. I'm very optimistic about paperless loans, and we are trying to do our part to make them a reality.