Mortgage data aggregator CoreLogic has launched a monitoring program designed to help lenders detect short-sale "property flops" by alerting them when there’s more than one loan application pending on the same property.
CoreLogic’s Short Sale Monitoring Solution is also designed to uncover patterns of unethical behavior by real estate agents and others involved in short sales, the company said earlier this month in inviting lenders to join a consortium that is sharing loan application and transaction data in order to detect fraud.
Lenders participating in the CoreLogic Mortgage Fraud Consortium will gain the ability to track real estate brokerages and agents "across multiple lender relationships," the company said.
In announcing the launch of CoreLogic’s Short Sale Monitoring Solution, the company said lenders who handle about 65 percent of mortgage loan applications have joined the consortium.
In a property flop, unethical real estate agents may fail to submit an offer on a short-sale property to a lender in order to help an investor purchase the home at a lower price. The home can then quickly be resold to the party that made the initial, higher offer.
Based on a recent analysis of 250,000 short-sale transactions, CoreLogic estimates that lenders are taking $310 million in unnecessary losses on short sales each year. The company found evidence of "egregious flipping" on about 2 percent of short sales, with an average loss of $41,500 per transaction.
"Even when no fraud exists, resale prices that are considerably higher than the initial short-sale price indicate that below-market valuations are setting up the opportunity for investors to capitalize on valuation inaccuracies," CoreLogic said in pitching the new monitoring service to lenders.
When lenders submit pending short sales to the system, it checks them against the consortium database to see if any loan applications have been submitted to purchase the property in the last 45 days. The system continues monitoring for other loan applications on the property until closing, so that lenders can be sure they have seen all offers involving a loan.
After closing, the system continues monitoring the property, alerting lenders to resales. The system detects fraud by flagging resales that take place faster than it would usually take to process a loan application, and "by creating visibility to the insiders who may be perpetrating the fraud."
Lenders also have the option of retrospectively analyzing their past short sales for signs of fraud, in order to pursue criminal prosecution or legal action, evaluate the effectiveness of valuations, and spot markets with high rates of fraud or below-market valuations.
In addition to the Mortgage Fraud Consortium, CoreLogic’s fraud detection tools can also draw on listings data the company licenses from multiple listing services.
The company announced agreements this month to license historic listings data from eight MLSs with a combined total of 82,000 members, and said it is in negotiations to license listings from more than 50 other MLSs.
MLSs will get a share of the revenue CoreLogic generates by feeding sold listings data to software applications designed to track market trends and assess risk. The company has confirmed that sold listings data CoreLogic licenses from MLSs will be utilized by applications like the company’s LoanSafe Fraud Manager.