4/23/12: Sunshine, The Great Disinfectant
No video today. Bob called in at 5:30 a.m. from Phoenix, Arizona, where he’s attending the MBA’s National Fraud Issues Conference 2012. Bill is back at home base in Oxford.
Bob Dorsey: It’s a little early here, Bill. It’s dark out there.
Bill Rayburn: Well, that’s the way it is with a lot of mortgage lenders when it comes to fraud. The files are dark, the lenders can’t see through them, and they have no transparency.
Bob: You’re right, Bill. This conference is a joint conference on mortgage fraud and technology. A lot of people are trying to use technology to solve some of these fraud issues — fraud from the buyer, fraud about the seller, fraud about the title, fraud on the property itself. There are all these scams where people are trying to take advantage of borrowers who are behind on their mortgage. So they’re anxious to get some technology to help themselves.
Bill: There are two major types of fraud — fraud for property, where people are trying to get into or stay in a home, and fraud for profit, where people are trying to make money by “pumping and dumping” the properties. Let’s talk about how technology affects both of those.
Bob: The bank is trying to verify the facts, make a decision, and choose whether to lend under their existing risk parameters. If the buyer or seller is giving the bank false information, it may appear to the bank that the loan is more attractive than it really is.
Bill: Everyone relies on third parties — brokers or appraisers or data sources — to be sure they’re making an informed decision. Sometimes information is not fully shared or fully disclosed.
Bob: Yeah, or the information is fraudulently disclosed. People misrepresent what they’re actually providing. Verification takes time if you do it manually. To verify that the third party is correct, you have to use an additional third party –
Bill: — To have a checker on the checkers –
Bob: — That’s why the technology is so attractive.
Bill: Just like you have going in Arizona right now, the sun’s not up. We need the sun to come out and shine. Sunshine is a great disinfectant when you have fraud going on. Put sunlight on a process (which, essentially, is what technology aims to do) to ensure people are fully disclosing things.