UTAH LOAN FRAUD - part 3

This is Part 3 of a 4 Part Article I recently wrote concerning Mortgage Fraud in Utah.

WHAT CAN WE DO TO STOP LOAN FRAUD?

Unfortunately, in spite of the negative consequences of Mortgage Fraud, there will continue to be those who feel that the only way to complete a transaction is through misrepresentations. In hopes of decreasing, and ultimately eliminating mortgage fraud, I will offer 4 possible actions to be followed.

1. Increase Education. Much has been done in recent years to increase awareness among loan officers. These efforts are commendable, and should be included. I would like to see additional requirements associated with a loan officer’s continuing education dealing with loan fraud. However, more pressing in my mind, is the need to provide education to consumers. I would like to see efforts made by the various organizations and associations representing the mortgage industry, including the Division of Real Estate, increase efforts to educate the public regarding the types of loan fraud and the accompanying consequences. In addition, loan officers should be more proactive in educating clients and prospective clients about the consequences of loan fraud.
2. Enhance regulations. While a great deal has been accomplished, the Division of Real Estate does not have the necessary funding to properly investigate and prosecute Mortgage Fraud. Lobbying efforts should be increased to secure adequate funding and additional investigators should be hired and trained. In addition, the already steep consequences should be enhanced, specifically for the seller and buyer/borrower involved in a transaction.
3. Loan Application Due Process: Loan Officers and borrowers alike should be more judicious in reviewing loan application materials. An applicant should not sign incorrect loan documents, and a loan officer should refuse to process a transaction. More care should be given to careful review of a file prior to closing.
4. Incentivize Proper Transactions: Lenders should award financial benefits to loan officers and underwriters who maintain clean loan histories, including reporting illegal behavior, hereby encouraging more efforts to avoid potentially fraudulent loans. In addition, lenders should make investment and non-owner occupied loans more satisfactory to borrowers. A buyer is less likely to encourage a fraudulent loan if he or she feels less vulnerable to increased interest rates and lending restrictions.