A new mortgage fraud alert system is available to lenders through the Mortgage Asset Research Institute, the company reported Wednesday.

The early alert system notifies participating companies about emerging patterns of alleged fraud in its early stages. Companies input mortgage-related information into the system and then can use the shared data to take action to mitigate potential risk and minimize their own exposure.

“Fraud is a growing, significant issue in the mortgage industry and can have a widespread negative impact on consumers, neighborhoods and professionals,” MARI general manager William Matthews said in a statement.

One costly fraud trend, known as “property flipping,” can temporarily inflate property taxes, depress long-term real estate values and diminish the quality of life in residential neighborhoods. Flipping is also a major source of financial losses to mortgage lenders, investors and insurers.

Another trend that has grown is identity theft, which can take years to undo the damage caused to consumers. Identity theft is the fastest growing white-collar crime in the U.S., according to the Federal Trade Commission.

The Mortgage Bankers Association worked closely with MARI to create the Mortgage Fraud Alert System to address, identify and alert the industry about mortgage fraud issues at the time of detection.

For example, an early discovery of an alleged lien release scheme involving hundreds of properties in Pennsylvania was recently submitted to the system. The scheme consisted of third-party speculators who purchased properties at county tax upset sales and then filed quiet title actions seeking to divest all liens of record, including mortgages against the property. The actions were filed solely on the hope that they would go unanswered by the lien holder and a default judgment will be issued to discharge all liens.

“Where there is money, people will be creative,” MARI founder James Croft said.

MARI, a ChoicePoint company, provides risk management services to the mortgage industry. MARI’s MIDEX database services are endorsed by Mortgage Bankers Association, National Home Equity Mortgage Association and Manufactured Housing Institute.


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