Managing fraud

According to industry commentators, mortgage fraud - often courtesy of identity theft - is on the rise in Australia. Therefore, it makes sense to make sure you take steps to protect your business from falling victim to fraudulent activity.

There are a number of ways in which you can protect your business from fraud:

Manual checks

There are many checks you can run to identify and minimise fraud, even without sophisticated software and systems.

For example:

  • Study title searches that you're presented with. Make sure the names on the deed perfectly match those on other forms of identification; look out for the words 'This edition issued pursuant to s.111, Real Property Act 1900' which indicates the original deed has been lost, mislaid or destroyed, and the one you're seeing is a replacement. Also, check the edition date which will tell you when the last transaction on the property occurred.
  • Insist on seeing original documents when verifying an applicant's identity. Photocopies can be unreliable, especially when it comes to photo identification like a driver's licence or passport.
  • Run a credit check and conduct face-to-face interviews with all applicants - minimal credit history can be a pointer to a fictitious identity.
  • Look out for signatures that change from document to document, or ones that look as though they have been traced. It might sound obvious but even obvious discrepancies can go unnoticed.
  • Verify an applicant's home address by posting something that needs confirmation to that address. Have someone from your business telephone the clients to verify phone numbers. Be wary of applicants who will only supply a PO Box, rather than street address, or mobile phone number rather than landline.
  • Verify the identity and validity of the applicant's Referrers, like employers, by contacting them directly. Beware of potentially fraudulent letters of employment and look for spelling mistakes, poor grammar and sentence structure.
  • Check PAYG payment summaries and pay slips match ATO tax returns. Look out for basic mathematical errors on payslips. A variety of software programmes can replicate pay slips visually but they'll often fall down on basic maths.
  • Consider obtaining a physical valuation of the property to prove it exists and that the applicants have access. At the very least, valuation documents should be scrutinised to ensure the valuation figure has not been forged or altered and that it comes from an authorised valuation company.

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Software solutions

There are various software programmes available to help Brokers minimise fraud. They work by detecting early warning signs of mortgage fraud - simple things like discrepancies between the income someone has declared on their application and what their group certificate says. Keep in mind, however, that some software programmes aren't always fool-proof - while they can provide some checks, balances and warning signs, many fraudulent practices can only be picked up and properly investigated in person.

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Insuring yourself

One way to protect you and your business from fraud is to take out insurance.

  • Professional indemnity insurance will protect you in the event that a borrower you refer to a lender has been fraudulent in their application and the lender therefore feels they have suffered a loss and makes a claim.
  • Title insurance will protects against title fraud. It will insure your business against any claims that arise from arguments about the ownership of a particular piece of property, possibly as a result of a forged certificate of title.

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