Mortgage Fraud White Paper

Mortgage fraud is a growing phenomenon with a signifi cant and direct impact on every party to the mortgage relationship, including brokers, managers, lenders or securitisers, insurers and consumers. The Mortgage & Finance Association of Australia (MFAA) engage PricewaterhouseCoopers (PwC) to produce a joint white paper on methods to reduce fraud risks in the mortgage loan application process. This paper represents the MFAA taking a leading role to promote discussion about mortgage fraud and strategies to address fraud risk.

The results of the study undertaken by PwC are set out in the following pages. In preparing the white paper, PwC reviewed the current state of fraud in the mortgage industry in Australia and in comparable markets overseas, and conducted indepth consultation with representatives from:

• Banks

• Securitisers

• Mortgage Managers

• Mortgage Aggregators

• Mortgage Brokers

• Lenders Mortgage Insurers

• Professional Indemnity Insurance Brokers, and

• Title Insurers.

The objective of the white paper is to assist members in reducing the risk of mortgage fraud, through awareness of the risks and providing a description of procedures that mitigate these risks.

Electronic Processing 

As with many forms of financial transactions, the future of the loan application process may evolve to include a range of electronic and/or automated aspects. Electronic processing and other technological innovations may improve processing efficiency, however, these changes carry the potential to expose particular aspects of the loan application process to an increased risk of fraud. 

All of these factors will influence consumer confi dence in and response to the mortgage loan application process. A consistent and co-operative approach to the constantly evolving risk of fraud and non-compliance will assist the mortgage industry as a whole in preparing for and managing the potential dangers and, crucially, may assist in sustaining consumer confidence in the process.

Title Insurance 

An increasing number of securitisers and lenders are taking out title insurance to manage risk particularly mortgage fraud. A title insurer will typically put measures in place to mitigate fraud. These include simple procedures for mortgage processors to follow to help detect fraud before the loan funds are drawn down, and working with originators to highlight areas where there is a greater risk of a fraud occurring.

MFAA PwC White Paper