The Impact Of Generative AI On Mortgage Fraud
The recent explosion of generative AI will surely improve tactics for committing mortgage fraud. Exactly how and where it will begin is up for debate, but lenders need to be mindful that methods to falsify documents and directly sourced data will improve notably. Mortgage loans are complex, slow, and aren’t an immediate source of cash, so they may not be the most attractive target for external actors such as overseas scam operators. It is reasonable to assume the first uses are likely to come from the internal parties who are already disposed to commit mortgage fraud.
Today, old-school faked paystubs and tax returns fool lenders often enough to be a significant issue. As higher-quality fakes become the norm, it will be less likely the underwriter can spot a math error or font change. It is also probable that corresponding bank statements will be produced along with the phony employment documents.
As we learn more about our changing environment, here are some commonsense practices to keep in mind:
1
Recognize the value of a comprehensive view of the loan transaction when addressing red flags. Often fraud slips through because a red flag was considered and cleared in isolation, when it didn’t make sense with the full picture. With high-quality documents and increasing task automation, take care to preserve the holistic mindset of origination staff. The LoanSafe Fraud Risk Score is modeled using thousands of known frauds and hundreds of data points, and it can be a useful tool to highlight the riskiest loans for the underwriter.
2
Cross-reference wherever possible between different documents and data points. Using multiple independent sources improves your ability to detect manipulated information.
3
Be wary of anything that is being pushed as urgent or has last-minute changes, especially if it involves money transfers. Verify information early through a standard process and trusted sources. Include additional validation before money is transferred.
4
Inform your staff that even trusted sources can be manipulated by being fed false data, so even if a document seems unimpeachable, it rarely is.
❝The stability we have seen in fraud risk is due to low volatility in the real estate market. As interest rate cuts and new home ownership programs are likely in the next year, expect a shift in the risk landscape. Fraud schemes are opportunistic and will adjust to the environment, so lenders should anticipate how changes will impact their risks and plan for that.❞
~ Bridget Berg, CoreLogic Senior Director, Borrower Solutions
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