How much could wire transfers and title fraud cost lenders?

With lending costs rising, causing margin compression, lenders should be careful to reduce costs in the lending process whenever possible.

In addition to increased production costs, loans are also exposed to an increased risk of remittance and security fraud risks, with nearly half of transactions at high risk according to a Q3 analysis by MISMO-certified financial technology and prevention fintech FundingShield.

Of all the loans reviewed by the fintech firm, 47% had at least one risk finding, said Ike Suri, CEO of FundingShield. Loans with at least one risk finding had an average of 2.1 risk findings per loan based on risk metrics such as licensed parties, transfers, CPL data accuracy and CPL validity with title insurers.

Additionally, FundingShield found that 14.3% of transactions had wire transfer issues, a number that remains alarmingly high.

“This growth is due to all-time highs from the first and second quarters of this year. eClosings and other automation technologies continue to grow in importance, and at the same time with new technologies, new fraud schemes and vulnerabilities have emerged, ”said Suri.

“The real estate title and comparison arena continues to be a hot target for cyber criminals and fraudsters inside and outside of US borders.”

Increased costs associated with remedying referral and title fraud

Remedying referral and title fraud can be costly. FundingShield reports that in addition to the monies lost from a single transaction-related remittance fraud, the total cost of associated reporting, auditing, attorneys, compliance reviews and disclosures, investigations, law enforcement cooperation, and the state insurance process have decreased All time high. The company estimates the total cost to be in excess of $ 900,000 per event.

In addition, the insurance costs for fault and omission insurance and professional liability continue to rise. Lower coverage means lenders need to be even more careful. The different systems and processes used by those involved in the process can result in transactions not being properly registered or data problems in the systems of the title insurers at the time of conclusion. Title agents continue to struggle with renewal challenges and the cost of insurance coverage as risk appetite has declined in the insurance market due to risks such as wire transfer and title fraud.

Workflow-related errors

Comparing the numbers for the third quarter of 2021 with the numbers for the second quarter of 2021, the fraud and risk exposure related to CPL errors increased by 19.7%, and CPL / agent validation errors at title insurers increased by 6 .5%; and a 12.8% increase in government licensing problems with concluding agents.

“These issues highlight manufacturing errors, misrepresentations, control problems and inaccurate data that create ideal conditions for fraudsters to prey,” said Suri. “Efficiency is required to identify pre-closure issues in title workflows that can help reduce the cost and inefficiencies of post-closure / post-closure documents.”

This is critical, Suri says, because eClosings’ optimized workflows accelerate processes, but can create closure weaknesses that leave opportunities for referral or title fraud.

“We continue to see how our processes improve closing document validation results in greater efficiency and fewer errors in the post-close environment for our customers, who are seeing increased ROI that many lenders struggle with using these back-end workflows and – Manage costs. “Said Suri.

FundingShield helps prevent, detect and remediate inefficiencies, threats and risks in a timely manner so that lenders can operate without disruption, reputation concerns, or losses by only working with valid, verified and audited closing agents.

To read FundingShield’s full Wire and Title Fraud Index for the third quarter of 2021, click here. For quarterly historical reports or more information, contact [email protected]

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