$11 Billion in Mortgage Loan Applications Called Into Question by Interthinx

January 1, 2011 / 4 min read

In six-month window, a single alert within FraudNET Loan Exchange uncovers billions in potential loss to lenders and investors

AGOURA HILLS, CA, March 13, 2008 — Interthinx®, the leading provider of mortgage fraud detection products, announced at the Mortgage Bankers Association’s National Fraud Issues Conference that company analysts have uncovered more than 42,000 mortgage applications, totaling nearly $11 billion, containing significant misrepresentations of the borrowers’ income. These applications were all originated and submitted for Interthinx review in the last six months of 2007.

“For the first time, the industry is getting a real-time look at the scope of mortgage fraud, and these numbers are staggering,” said Kevin Coop, president of Interthinx. “Based on what we’ve seen over the past few years, these results confirm what we’ve been saying all along: fraud is the rotten core of the mortgage meltdown.”

The loans were discovered when Interthinx analysts determined that its FLEX (FraudNET Loan Exchange) program had generated 42,610 Income alerts. The Income Alert warns clients that a borrower has submitted multiple applications and that the borrower’s income as reported has jumped by at least 15 percent within a prescribed period of time. The Income Alert signals that a borrower or another party involved in the transaction has manipulated the reported income to qualify for a loan that would not be made if the true income were disclosed.

FLEX is a proprietary program that allows lenders to leverage data from all other Interthinx clients to more accurately assess the consistency and veracity of a given application — something lenders cannot do for themselves.

“The industry has not recognized the pervasiveness of fraud in part because lenders have legal obligations to protect consumer data. So if ‘ABC Bank’ discovers a fraudulent application, it can’t tell ‘XYZ Bank’ to watch out,” Coop said. “Through FLEX, Interthinx is able to compare data from all of its clients’ applications and reveal the deceptions without compromising consumer privacy. Knowing the truth lets our clients prevent billions in losses. What is really disturbing is that the $11 billion represents just one of the alerts used in the six-month timeframe.”

Interthinx analysts are currently evaluating data for FLEX Occupancy and Straw Buyer alerts. The Occupancy Alert is triggered when a borrower submits applications for multiple “owner-occupied” properties within a prescribed period of time. Misrepresentation of occupancy causes lenders to inaccurately assess the true level of risk and to incorrectly price the loan. The Straw Buyer Alert is triggered when the same subject property appears on applications from different borrowers within a prescribed period of time. The Straw Buyer Alert is a signal that the property and the borrower may be involved in an organized fraud for profit scheme. Loss severity is greatly increased in organized schemes since they can involve hundreds of loans.

Interthinx intends to release the results of its additional analyses in the near future.

About Interthinx
Interthinx, Inc., an ISO business, is the nation’s leading provider of proven risk mitigation and regulatory compliance tools for the financial services industry. Used at every point in the mortgage lifecycle to prevent mortgage fraud, compliance violations and to assess risk, Interthinx is relied upon by more than 1,400 customers, including 15 of the top 20 mortgage lenders and three of the top five largest financial institutions. With technology that earned Mortgage Technology Magazine’s prestigious 10X Award as “a diagnostic and corrective solution of the highest order,” Interthinx expertise in predictive analytics, data mining, and risk scoring sets the standard for the industry and directly increases the value of client portfolios. For more information, visit www.interthinx.com or call 1-800-333-4510.

About ISO
A leading source of information about risk, ISO provides data, analytics, and decision-support services to professionals in many fields, including insurance, finance, real estate, health services, government, human resources, and risk management. Using advanced technologies to collect, analyze, develop, and deliver information, ISO helps customers evaluate and manage risk. The company draws on vast expertise in actuarial science, insurance coverages, fire protection, fraud prevention, catastrophe and weather risk, predictive modeling, data management, economic forecasting, social and technological trends, and many other fields. To meet the needs of diverse clients, ISO employs an experienced staff of business and technical specialists, analysts, and certified professionals. In the United States and around the world, ISO helps customers protect people, property, and financial assets.

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Contact:
Michael DiVirgilio
MWW Group (for ISO)
213-486-6560 x328