Mortgage lending is a hot target for fraudsters in the U.S., and the situation has grown worse since the pandemic began, according to a new report from LexisNexis.
The LexisNexis True Cost of Fraud Study: Financial Services and Lending examines fraud trends in North American financial services and lending sectors. The 2021 edition is based on responses from August and September 2021.
The report revealed that U.S. banks and mortgage lenders saw an increase in fraud costs and attack volumes compared to before the pandemic. Every $1 of fraud loss now costs financial service firms $4, compared to $3.25 in 2019 and $3.64 in 2020.
For mortgage lenders, fraud costs $4.40 for every $1, 23.5% higher than before the pandemic hit in early 2020.
The FBI characterizes mortgage fraud as “material misstatement, misrepresentation, or omission in relation to a mortgage loan which is then relied upon by a lender.” Fraud for housing, in which the goal is to acquire a house, is considered distinct from fraud for profit, for which making money is the goal.
Under both federal and state law, mortgage fraud carries a sentence of up to 30 years in prison and up to $1 million in fines.
Attacks on large mortgage lenders have risen, especially for lenders who originate loans online. Respondents to the study said that criminals have targeted mobile channels during the pandemic. More than half said their mobile channel fraud rose by 10% or more in 2021.
Of particular concern were “malicious bot transactions,” as respondents said it is difficult to spot synthetic identities. Banks have trouble distinguishing new account openings and logins without causing friction with their current customers.
Mortgage lenders also said they worried about balancing fraud detection and customer friction. They also reported a lack of tools to detect and prevent fraud across international borders, especially concerning account takeovers.
“The foreseeable future is unclear about the new normal. With the accelerated movement to online/mobile transactions and payments, financial services and lending firms must continue to build out and enhance the digital customer experience while protecting against fraud,” said Christopher Schnieper, director of fraud and identity, LexisNexis Risk Solutions.
“Fraud prevention must assess both physical and digital identity attributes as well as the risk of the transaction. It is difficult for even the best trained professional to detect the increasingly sophisticated crime occurring in the remote digital channels without the aid of solutions that detect digital behaviors, anomalies, device risk, and synthetic identities.”
Firms that utilize these solutions alongside fully integrated cybersecurity operations tend to have lower fraud costs.