Jan Clark, vice president of sales and marketing, Ernst Publishing Co.

Raymond Fleischmann, associate editor

As published in Scotsman Guide's Residential Edition, June 2012.

Mortgage fraud affects everyone working in the industry today, from brokers to escrow agents to borrowers themselves. Along with an increase in foreclosure activity has come an increase in fraud activities, as well — at least until recently. Because mortgage fraud tends to be adaptable and diverse, it remains as significant a topic as ever before. Jan Clark, vice president of sales and marketing for Ernst Publishing Co., spoke with us about trends in fraud and her company’s recent national survey on the subject.

What did Ernst’s survey on mortgage fraud find?

The survey was done in two different forms: One was for PRIA, the Public Records Industry Association, and then the other was for ALTA [the American Land Title Association]. We surveyed just under 9,000 participants, and [we found that] fraud really has gone down. It hasn’t increased, but what it’s done is it’s moved from mortgage fraud to foreclosure fraud.

Why has there been a correlation between states with high levels of fraud and those with high levels of foreclosures?

Fraud is very opportunistic. Foreclosure-fraud schemes have been out there for quite a long time. The difference is that now, with foreclosure rates going up, there’s a greater opportunity for those folks to go out and perpetrate that kind of fraud. If foreclosures are up, fraud is going to move with it.

How can brokers and originators protect themselves and their clients from mortgage fraud?

Make sure that everyone within a transaction has been vetted. One of the big points [found by] the survey is that people would like to see stronger licensing — licensing for loan officers, licensing for title agents, stronger oversight in terms of notaries — so that everyone within a transaction definitely has skin in the game and has been vetted before they come in the door.

With regards to thwarting mortgage fraud, what further regulatory changes would you like to see?

Personally, I think we’ve [already had] a lot of regulatory and guideline changes. One of the things that you’ll find is that SARs [suspicious activity reports] are down, and they’re down dramatically. Things are getting better. I think that we’re doing a good job. I don’t know if we need more regulation as much as we just need everything to run its course and take hold. From an industry standpoint, I think we’re all regulated enough right now.

In order to further curtail fraud, what needs to happen in the industry?

We’ve seen the larger lenders and larger title companies put in practices to help mitigate fraud, but we’re still seeing the smaller independent agents and the smaller lenders beginning to catch up. So, I would say [that the biggest concern] over the next year is getting the whole industry on board. And it is happening. It’s just a little bit harder to get that impact all the way through [the industry] and get everyone complying.

Raymond Fleischmann is an associate editor at Scotsman Guide. Reach him at (800) 297-6061 or raymondf@scotsmanguide.com.