Real estate report finds every dollar of fraud costs deposit originators $5.34
Mortgage fraud increases over past three years as online and mobile-only mortgage transactions increase
ATLANTE, May 17, 2022 /PRNewswire/ — LexisNexis® Risk Solutions today released the inaugural edition of the True Cost of Fraud™ study for real estate. The newest addition to the True Cost of Fraud™ report suite, the study surveyed 360 industry risk and fraud leaders to analyze current fraud trends in United States mortgage originator, mortgage servicing and securities/settlement markets. The report also explores key industry pain points related to fraud detection, prevention, and customer experience. In addition to analyzing the cost of fraud with the level of successful attacks, the study explores the time and resources mortgage originators and services have applied to prevent attacks.
A large majority of businesses report that overall fraud has increased over the past 1-3 years, with consumer fraud accounting for approximately two-thirds of lender and manager fraud losses over the past 12 months. A large majority of businesses indicated that the pandemic has increased app fraud across all channels, not just for online and mobile apps. Early in the mortgage process, the fraudulent application is a key entry point for fraudsters.
Key Findings from the True Cost of Real Estate Fraud Study:
- Attacks and Costs: The cost and volume of mortgage loan fraud is high for originators, managers and title/settlement companies, with the labor for detecting, investigating, reporting and recovering fraud representing a significant portion of these costs. Custodian originators have the highest cost, where each $1 fraud costs them $5.34. Non-custodial originators (mortgage companies) realize an average cost of $4.66 for every $1 of fraud, a much lower figure.
- Digital transactional impacts on fraud: Fraud costs come largely from consumers looking to buy a new home through online and mobile transactions. Direct-to-consumer (retail) and matched lending are the top transaction types, with direct-to-customer accounting for a larger share of fraud costs and average monthly attacks. However, custodial originators and securities/settlement companies also bear a significant share of losses from construction-related loan fraud.
- Main challenges related to fraud: Identity verification is a major challenge for mortgage originators, managers and title/settlement companies. The challenge is to assess digital identity attributes such as email/phone number and identify synthetic identities. This contributes to other issues related to customer friction, inability to detect malicious bots, and difficulties in distinguishing between legitimate consumers and bogus consumers. The pandemic and the growth of the mobile channel have compounded these issues and increased the risk of fraud with interactions between call centers and phones.
- Best practices: The results show that companies using a multi-layered solutions approach integrated into cybersecurity and digital customer experience operations can reduce fraud and related costs while improving identity verification and threat detection efficiencies. frauds. Integrating fraud prevention with cybersecurity operations throughout the digital customer experience and layering supporting capabilities such as artificial intelligence and machine learning further strengthens fraud prevention.
“Although the future is uncertain, it is safe to assume that the accelerated movement towards online/mobile transactions will continue to grow and that mortgage originators, managers and securities/settlement companies should develop and improve the ‘digital customer experience while protecting against fraud’, mentioned dawn hill, director of real estate fraud and identity strategy at LexisNexis Risk Solutions. “A successful approach to fraud detection and prevention involves integrating technology, cybersecurity and digital experience operations in a way that addresses the unique risks of different transaction channels and payment methods, as well as by individuals and types of transactions.”
Download a copy of Study of the real cost of real estate fraud.
About LexisNexis Risk Solutions
LexisNexis® Risk Solutions harnesses the power of data and advanced analytics to deliver insights that help businesses and government entities reduce risk and improve decisions for the benefit of people everywhere. We provide data and technology solutions for a wide range of industries, including insurance, financial services, healthcare and government. Based in the Atlanta metro area, Georgia, we have offices around the world and are part of RELX (LSE: REL/NYSE: RELX), a global provider of information-based analytics and decision-making tools for professionals and enterprises. For more information, please visit www.risk.lexisnexis.com and www.relx.com.
LexisNexis and the Knowledge Burst logo are registered trademarks of RELX Inc. Copyright © 2022 LexisNexis Risk Solutions Group.
SOURCE LexisNexis Risk Solutions