Mortgage data aggregator CoreLogic is inviting lenders to join a consortium-based service it says will allow members to monitor properties involved in short sales for evidence of subsequent fraudulent flipping, and uncover evidence of "unethical behavior" by real estate agents and others.

Short sales have more than tripled since 2008 to an estimated 400,000 per year, and lenders are probably getting burned on about 2 percent of those transactions, according to a CoreLogic study of 250,000 short-sale transactions.

CoreLogic found evidence of "egregious flipping" on 1 in 53 short sales, with lenders taking an "unnecessary loss" averaging $41,500 on those transactions.

By definition, lenders take a loss on a short sale by agreeing to allow a homeowner sell their home for less than what they owe on their mortgage in order to avoid the potentially greater expense of foreclosure.

CoreLogic looks for signs of questionable or fraudulent sales, such as rapid resales of properties or repeat transactions in which the resale amount is "vastly higher" than the short-sale amount.

While CoreLogic says the definition of what constitutes fraud continues to evolve, it estimates that lenders are being bilked out of $310 million in unnecessary losses on short sales each year.

"The best way to mitigate fraud risk and unnecessary loss is through a collaborative effort where lenders collectively share pre-closing and post-closing information," said Tim Grace, CoreLogic’s senior vice president of fraud analytics, in a press release.

"Lenders in the CoreLogic Mortgage Fraud Consortium will benefit greatly from sharing knowledge of concurrent transactions pending on short-sale properties in real time."

Members of the CoreLogic Mortgage Fraud Consortium will provide information that can be analyzed by the company’s new short-sale monitoring system, the company said.

On pending transactions, the monitoring system can be used to check for other pending loan applications for the same property — an indication that a questionable flip is already in the works.

After a short sale closes, subsequent transactions will generate alerts to both the original short-sale lender and the resale lender, allowing the first lender to review sale terms for violations. The new lender is also alerted that if fraud is discovered in the dual transactions, that lender could be a party to it.

Lenders participating in the consortium will also have the ability to track the behavior of real estate brokerages and agents "across multiple lender relationships," CoreLogic said.

Real estate agents "play a key role in most short-sale transactions," the study said, inevitably wearing two hats. Sometimes they are representing a lender, and sometimes a seller.

"This puts them in a tempting position to manipulate transactions for profit," the study said. A hypothetical example of short-sale fraud illustrated in the study involves a lender who hires a real estate agent to sell a property with a $150,000 mortgage.

The agent receives a $120,000 offer from a family that wants to buy the home. But instead of submitting the offer to the lender, the agent contacts an investor she knows, who submits an offer of $100,000. Because the agent has withheld the higher offer, the lender accepts the investor’s $100,000 offer. The agent then negotiates another sale of the property from the investor to the family for $120,000.

"The Mortgage Fraud Consortium’s collective information and risk reporting can supply evidence of unethical behavior and provide lenders a way to avoid involvement in potentially compromised future transactions," the study said.

CoreLogic announced in April that Wells Fargo was implementing First American CoreLogic’s LoanSafe Fraud Manager, which uses predictive models created from the Mortgage Fraud Consortium’s data.

At the time, CoreLogic said that 10 other lenders were evaluating LoanSafe, and that the Mortage Fraud Consortium database included more than 80 million loan applications and more than 200 million records from servicing data files.

In addition to collecting data from lenders, CoreLogic aggregates data from many multiple listing services, and has recently begun licensing sold listings data.

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