Lenders get good marks for managing “real” credit risk such as a person’s ability to repay credit granted or cases of insider loan fraud, but risk managers often overlook the potential for fraud in areas other than card portfolios, new research from TowerGroup has found.

“As the frequency and types of consumer loan fraud continue to evolve, we are seeing the emergence of fraud in secured portfolios such as home loans,” said Christine Pratt, senior analyst in the consumer lending and bank cards practice at TowerGroup and author of the research.

A particularly disturbing trend, Pratt said, is the rise in real estate loans initiated by thieves using stolen identities. She said the dollar damages possible for institutions targeted by thieves for mortgage or home equity loans against property they don’t own is staggering.

“One takeaway for credit managers from TowerGroup’s findings is that organizations marketing those types of products must check and double-check existing procedures and technologies to ensure that they are on alert for this type of activity, so that their customer information does not fall into the wrong hands,” Pratt said.

Some highlights of the research include:

  • Even though fraud generally falls under the category of “operational risk,” some fraud is entwined with credit risk that it is virtually indistinguishable.

  • Vigilance in managing credit risk is essential in both servicing and managing portfolios. There is no shortage of risk after the customer’s loan has been approved and the information makes its way to the servicing operation. There is a need to manage costs and provide quality processing to retain and cross-sell profitable customers.

  • Credit risk in the servicing arena pales in comparison to risk in collections and recovery, where investment in technology lags all other consumer credit processes.

***

Send tips or a Letter to the Editor to samantha@inman.com or call (510) 658-9252, ext. 140.

Show Comments Hide Comments

Comments

Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription