Another indication of a possible straw-buyer situation is the addition of a third co-borrower with good credit. Lenders might use the highest credit score of the three borrowers to qualify the loan even though that third borrower is not truly a purchaser of the property. This type of fraud typically increases payment defaults.

3. Identity theft: If a borrower recently had a significant extension of credit or multiple changes of address, it may be a case of identity theft. You often can identify this type of fraud by a few key features on borrowers' credit reports:

• The number of credit cards and credit lines that have been granted in the past three months;
• The frequency of address changes;
• Indications or alerts that the Social Security number has not been issued or is associated with a death-benefit claim; or
• Any indications of aliases where names are significantly different from the borrower's true name.

Although identity theft is relatively rare in mortgage fraud, the impact of a single case can seriously impact a broker's relationship with a lender.

4. Income fraud: Income misrepresentation is common in mortgage-fraud schemes, and it can be identified by the following:

• Borrowers are young, but they claim to make a high income;
• Borrowers claim to have a high income, but they have few tradelines on their credit report;
• Borrowers' employer is not listed on the credit report; or
• Borrowers claim to have a high income, but they do not have any auto or home loans in their credit history.

The key to identifying income fraud is to look for inconsistencies between the borrowers' credit reports and their claimed income. If a credit report is inconsistent with the typical credit history of a person earning a high income, it should be investigated further.

5. Undisclosed assets and judgments: If borrowers try to hide assets or judgments and you find them in the credit report, you must bring it to their attention. Lenders often look for undisclosed assets and judgments when they are underwriting a loan file. Further, they consider the omission of assets and judgments on the application as a type of mortgage fraud.

Borrowers may try this if they want to get a better interest rate for an investment-property purchase. If they are not selling their current primary residence and they don't disclose their current home loan, their debt-to-income ratio will appear artificially low. Inconsistencies between borrowers' applications and credit reports, such as undisclosed mortgages or property-tax liens, can help you identify this type of fraud.

Brokers can identify most of the major fraud schemes by maintaining rigorous attention to detail. If you focus on the credit-report data elements to identify potential misrepresentations before submitting a loan, lenders will gain increased confidence in your ability to generate high-quality loans.

Your time is valuable, and ensuring a successful business standing is even more important now than in the past. By using scoring technologies that pinpoint potential fraud or payment-risk issues with loan applications, you can conduct a timely, focused review to eliminate problems before it's too late. Taking advantage of this technology also can improve your performance measurements and enhance your business relationships with lenders.

Frank McKenna is co-founder and chief fraud strategist for BasePoint Analytics, based in Carlsbad, Calif. BasePoint Analytics is a leading provider of predictive analytic fraud and risk-management solutions for mortgage, global-banking and consumer-services industries. McKenna can be reached at (760) 602-4971, ext. 104, or via e-mail at fmckenna@basepointanalytics.com.

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