Mortgage Fraud is No Game – Usually.
Fraud Team's Board Game Is Effective in Training Lenders
By Jan Cook | December 03, 2013
Mortgage fraud is a widespread and serious issue. The Financial Crimes Enforcement Network reported an all-time high of 92,561 Suspicious Activity Reports (SARs) filed in 2011. Although the number of SARs filed dropped in 2012 to a level consistent with previous years, law enforcement remains engaged in fighting this source of financial damage.
In an effort to stem such losses, Fannie Mae has a dedicated team that works to help both lenders (and ultimately homeowners) avoid potential fraud. The fraud team addresses conferences, provides direct training, and leads web seminars on fraud prevention. Fannie Mae also maintains a Mortgage Fraud Prevention webpage, which has been viewed more than 73,000 times since 2009.
One of the most effective training tools in working with lenders has turned out to be a board game originally developed by team members Amy Heinz and Kim Ellison, in collaboration with other industry professionals. Fraud City is not likely to replace the traditional favorites on the family game shelf, but it provides an entertaining way to impart some serious messages, says Kirk Poehlman, manager of Industry Relations at Fannie Mae and a member of the fraud team.
The rules are simple, Poehlman explains. Participants are divided into teams and each team receives a fictitious loan file that contains typical loan documents, including a credit report, appraisal, HUD-1, and closing documents. The team has 15 minutes to review the file and try to identify the red flags in the file. (Read here about common red flag concerns.)
Players then roll the dice and proceed around the game board, which takes them to squares representing various loan documents. Players can draw an Evidence Card that allows them to review appraisals, verify employment, and take similar investigative actions. Teams score points by identifying red flags and providing evidence of the type of fraud scheme being perpetrated.
The team updates the game scenarios to keep up with ever-evolving fraud schemes. Schemes change, but certain misrepresentations predominate. Among loans delivered to Fannie Mae from 2012 through July 2013, and on which Fannie has identified misrepresentations, well over half were related to borrower liabilities and income.
Misrepresentations of a material fact about the property and misrepresentations regarding comparable sales and occupancy are also common. Read descriptions of common fraud schemes here.
Financially distressed homeowners are often targeted in so-called “foreclosure rescue” schemes in which someone promises to resolve the homeowner’s financial problems in exchange for an advance fee. Victims not only lose such fees, they may lose their homes as well.
Other foreclosure-related schemes include the REO agent who fails to submit all offers on a property so that an accomplice can win the bid with a lower offer, or the scammer who conceals information in order to profit from short sale or REO flipping schemes. Other scams involve so-called sovereign citizens that deny a servicer’s authority or a financial instrument’s validity.
Lenders can contact the Mortgage Fraud Program or their Fannie Mae Customer Account Manager with suggestions or questions.
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