FundingShield’s Q3 2024 fraud analytics report showed that during the quarter, 46.43 percent of transactions on an $82 billion portfolio comprising residential, commercial, and business purpose loans had issues leading to a risk of wire and title fraud. It showed that on average, problematic loans had 2.23 issues per loan, indicating the lack of appropriate controls by closing agents and lenders to identify and fix issues, according to the report.
A release sharing the report’s results stated the third quarter saw record-high risk levels for closing protection letter (CPL)-related errors (45.1 percent of transactions) for critical data points such as borrower information, vesting / vested parties, non-borrowing parties on title, property addresses, borrower information and more. This is another example of a lack of accuracy between lender and title systems alongside the CPL validation issues, where 9.6 percent of transactions also had issues, according to FundingShield.
There were wire-related errors in 8.1 percent of transactions in third quarter, the fourth-straight quarter over 8 percent. License issues grew by 24 percent from the second to third quarter, as FundingShield saw more entities having lapsed, terminated, or suspended licenses and inconsistent data when verified with registrars, insurance regulators and licensing bodies. These persistently high levels highlight the need for source data verification in workflows and for trusted data sets being used as part of critical processes, according to the report.
Ike Suri, FundingShield CEO, stated AT&T reported that hackers stole data from 73 million customers, including Social Security numbers, account information, payment details, call and communication history. This type of data provides valuable information to bad actors to leverage as part of social engineered identities in fraud schemes making detection much more difficult, he added.
He stated controlling data sources, maintaining data accuracy and a process to validate data is paramount in the mortgage and real estate finance industry and central to the success of the current and ongoing digital transformation of all aspects of the process.
Artificial intelligence (AI)-based solutions present a great opportunity for automation, collaboration and process improvement, yielding better customer experience and pricing, Suri said. These benefits cannot be achieved without accurate data sets and real time data verification leveraging live repositories, which is the epicenter of responsible and efficient automation and AI initiatives.
The analytics included the following findings:
- The third quarter had a new record for number of issues found per transaction at 2.23.
- CPL-related issues had yet another new record level of 45.1 percent of transactions.
- 8.1 percent of transactions had wire-related issues, marking the fourth quarter in a row above 8 percent
- There was a 24 percent increase in license-related issues since the second quarter
- CPL validations, agent good standing, issuance limits and title file order registration issues in title insurance systems remained near the all-time high level of 9.6 percent.