Study finds fraud linked to up to 70 percent of defaultsMortgagepress.comBasePoint Analytics, early payment defaults, misrepresentations
BasePoint Analytics, a provider of scientific fraud analytics
and consulting services, announced the results of a new scientific
study which found that up to 70 percent of mortgage early payment
defaults can be linked to a significant misrepresentation on the
original loan application. The purpose of the BasePoint study was
to investigate the link between fraud and payment trends during the
early life of the loan. The result of the study concluded that
loans that contained egregious misrepresentations were up to five
times more likely to default in the first six months than loans
that did not. More importantly, the study concluded that predictive
models could be deployed early in the loan process to help lenders
predict which loans were likely to default within the first six
months, enabling the loans to be rejected pre-funding. In fact,
predictive models such as BasePoint's FraudMark for Origination
correctly identify approximately 40 percent of a lender's loans
pre-funding that, if booked, would stop paying within the first six
months.
"Many lenders are facing increases in repurchase requests and
early payment defaults [EPDs]. In an effort to help lenders deal
with these challenges, BasePoint has rigorously studied the issue
and found a direct correlation between EPDs and mortgage fraud,"
said Tim Grace, president and CEO of BasePoint. "We can demonstrate
for lenders and investment banks how they can substantially reduce
their EPD losses, and often within a short period of time. The cost
of mortgage fraud is borne by every person or family who buys or
sells a home. That's why BasePoint continues to focus on developing
advanced software solutions to put a stop to mortgage fraud before
it happens."
BasePoint analyzed more than 16,000 loans that were confirmed to
contain egregious misrepresentations in the loan file that later
led to a default. These misrepresentations included fraud such as:
income inflated by as much as 500 percent, appraisals that
overvalued the property by 50 percent or more, fictitious employers
and falsified tax returns. The study concluded that
misrepresentations can grossly affect the risk of a loan.
For more information, visit www.basepointanalytics.com.
