Red Flag Training3/14/13

Partners for the Path Ahead

HomeBridge has created the following fraud prevention “red flags” training tool to help detect early warning signs of any inconsistencies that should be questioned and supporting documentation should be obtained.

As part of our commitment to working with our Sellers we have developed a list which is not all-inclusive, but could potentially be red flags that may indicate fraud.

Red Flag Training

Partners for the Path Ahead

While the presence of one or more “red flags” do not necessarily indicate there was fraudulent intent, we encourage Sellers to implement internal policies to detect and eliminate fraud.

Quality is the prevention of mortgage fraud, and HomeBridge is committed to providing effective training on how to:

Identify and detect mortgage fraud

Monitor and question inconsistencies and require explanation and further documentation

Red Flag Training

Partners for the Path Ahead

Examples of discrepancies listed below include, but is not limited to, instances that would require explanation and possibly further documentation:

File information is not consistent throughout

The transactions in not arms length

The property was transferred in the last six (6) months

Signatures vary from document to document and are not consistent throughout the file

An owner-occupied refinance transaction, however it was discovered the borrower does not reside in the property

Current residence value is greater than the value of the property to be purchased

Is the purchase price and value reasonable and consistent with the down payment and seller incentives

Red Flag Training

Partners for the Path Ahead

Income, employment or asset documentation indicate evidence of alterations, misspellings or errors

Are there any fraud or active duty credit alerts or mismatched information on the credit report

Social Security number is mismatched or transposed (to access the first three digits of the SS numbers assigned through out the United States, go to: www.ssa.gov/employer/stateweb.htm)

Age of the applicant does not match the credit history

There is an address mismatched on the credit report or IRS transcripts

Applicant’s credit history shows accounts opened prior to his/her birth of SS issuance

Notice of credit freeze in response to request for a consumer credit report

Red Flag Training

Partners for the Path Ahead

Inconsistent activity pattern (i.e. volume of inquires, unusual number of recently established credit, change in the use of credit, etc.)

Income documentation does not match the 1003 or other file information such as address on W-2’s, paystubs or employer information

Purchase price is not consistent with the applicant’s income (i.e. value is less than ½ the borrower’s income)

Photograph or physical description is not consistent with the appearance of the applicant

Signatures on documents do not match

A significant commuting distance between applicant’s property and employer

Applicant is purchasing an investment property however does not own a primary residence

Red Flag Training

Partners for the Path Ahead

Same telephone number for applicant and employer

Liabilities shown on credit report that are not on the 1003

Recent inquiries from other mortgage lenders

Numbers that appear to be “squeezed” on any income documentation

Even dollar amount in year-to-date-or past-year earnings

Applicant reporting substantial income but no cash savings in bank

VOE is addressed to a specific individual’s attention

Red Flag Training

Partners for the Path Ahead

On the appraisal, the comps are a significant distance from the subject

Large positive adjustments are made to comparable properties

Appraisal is dated before the sales contract

Significant appreciation has occurred in a short period of time

Illegible signatures and/or variation in font type

Red Flag Training

Partners for the Path Ahead

Red Flag Training

• All information provided is at a high-level to help question and detect warning signs of mortgage fraud.

• Sellers are required to conduct a comprehensive review of all mortgage loans to assess the accuracy and integrity of all documents.

• All loans should be reviewed to ensure prudent credit underwriting practices and overall risk to evaluate the five (5) C’s of underwriting:

Character Capacity Capital Collateral Conditions