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Mortgage fraud and the problem with mere ID validation

Gary Satanovsky

verify id  In previous posts we have discussed the necessity of identity authentication for retailers, who face unscrupulous fraudsters with forged credit cards; as well as banks, casinos and other “financial institutions” who will soon be bound by law to establish customer identity as part of the expansion of the Bank Security Act. This is by no means an exhaustive list – as recent events have shown, the range of institutions affected by identity theft now includes mortgage brokers, and continues to spread.

A major mortgage fraud crackdown in Florida netted 10 criminals accused of taking out $8 million in loans under stolen identities. According to Florida Department of Law Enforcement:


Investigators allege the scheme included the recruitment of straw buyers, who were

provided with fraudulent Florida and New Jersey driver licenses and the personal

identification information of unsuspecting victims. Using the victims’ identities,

the straw buyers obtained credit and purchased properties for which they never

intended to make any mortgage payments. The same properties were resold or

"flipped” numerous times, often using the same scheme.


Obviously, not only the banks that approve mortgage loans, but realtors themselves, who are the first and main interface with the buyers, need to be vigilant against this emerging threat. In fact, most financial institutions, even those that already have current active anti-fraud measures in place, are vulnerable. The real challenge lies with the method of identity verification, rather than merely the presence or absence of those programs.

Currently, the most common authentication method involves cross-checking customer-provided data against database information. Red flags only go up if the address, driver license, social security or other common points would not match up. This certainly would not catch the Florida mortgage thieves, who had most of that information on hand. Identity data verification can, in fact, only deter a small proportion of relatively less sophisticated identity theft crimes.

Popular online database identity-verification services cannot keep up with modern high-tech criminals. Instead, new tactics focusing on the identity documents themselves, rather than the easily-obtainable information they display, are needed. In the coming weeks, Fraud Fighter will be conducting a webinar to showcase and display these new tactics; we will also lay out a general overview of the subject later this week.

Until then, we invite you to follow our Twitter feed @FraudFighting for the latest fraud news and trends.


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