Have you ever wondered how so many people are able to get loans approved without providing much documentation or undergoing stringent verification checks? Well, it’s often because many lenders lack proper fraud detection mechanisms. As a lender, you need to be cautious of fraudsters looking to make a quick buck at your expense. The good news is, with field investigation and tele verification features integrated into your loan origination system, you can easily detect fraudulent applications and avoid unwanted losses. These verification techniques allow you to validate the information provided by applicants through on-site property inspections and telephonic interviews. So don’t get duped, get yourself a loan origination system with robust fraud detection capabilities. Your business depends on it!
What Is a Loan Origination System?
A loan origination system (LOS) is the software lenders use to manage the entire lending process, from when a borrower first applies for a loan through closing. The best LOSs, like Celestiq LOS, include field investigation and tele verification features to prevent fraud.
Field investigation allows lenders to dispatch agents to verify information provided by the borrower. For example, if a borrower claims to earn a certain income or work at a particular company, the lender can send an agent to confirm these details in person. This helps ensure the loan application is valid and truthful before the lender approves and funds the loan.
Similarly, tele verification uses phone calls to verify information with employers, landlords, and other third parties listed on the application. Loan officers call to confirm the borrower’s employment status, income, rent payments, and other details. This provides an extra layer of assurance the information on the application is accurate.
With field investigation and tele verification, lenders can reduce fraud risk and feel confident they have a complete picture of the borrower’s ability to repay before approving a loan. These features are especially useful for non-traditional, high-risk, or hard money loans where verification is critical. They provide peace of mind the application is legitimate, which translates to fewer defaults, charge-offs, and losses for the lender in the long run.
For lenders searching for an LOS, look for field investigation and tele verification capabilities. They could save you from fraud and bad loans, and ultimately boost your bottom line. When combined with a full-featured LOS like Celestiq, you’ll have a powerful system to originate loans efficiently while mitigating risk.
The Growing Need for Fraud Prevention in Lending
With the rise of online lending and FinTech companies, loan fraud has become an increasing threat. As a lender, preventing fraud should be a top priority to protect your business and customers. That’s why field investigation and tele verification have become crucial components of any robust loan origination system.
Field investigation involves sending agents to physically verify information provided by loan applicants. They visit the applicant’s residence and place of work to confirm details like home ownership, income, and employment. This helps ensure the information provided is accurate before approving and disbursing funds.
Similarly, tele verification uses phone calls to validate information with employers, landlords, and other references. Loan agents call to confirm specifics like the applicant’s job title, salary, rental agreement details, and account information. This provides another layer of fraud protection by verifying data directly with the source.
With identity theft and synthetic identities on the rise, lenders can’t rely solely on information provided in a loan application. Field investigations and tele verifications offer a way to authenticate applicant details, reducing the risk of fraud. They minimize losses from defaulted loans and prevent funds from ending up in the wrong hands.
As digital lending expands globally, the threat of fraud will only increase. Lenders need advanced solutions with built-in fraud prevention to operate safely in today’s market. Features like field investigation and tele verification have become essential for any lender serious about combating fraud while providing a good customer experience. Using a loan origination system with these capabilities will give you peace of mind that your lending processes are secure.
How Field Investigations Prevent Fraud in Lending
Field investigations are critical for verifying information provided by borrowers and preventing fraud in lending. Sending an investigator to verify details in person can uncover things that would otherwise be missed.
Verify Borrower Information
It’s easy for borrowers to fudge numbers on a loan application or leave out key details. An investigator can double check things like:
Borrower income and employment. Speaking with employers directly helps ensure the information provided matches reality.
Value and condition of collateral like vehicles or property. Inspecting assets in person reveals their actual worth and whether there are any undisclosed liens or damage.
Occupancy status. Determining if a property will be owner-occupied, rented, or vacant helps minimize risk.
Identify undisclosed debt obligations. Pulling a soft inquiry credit report and searching public records can turn up debts the borrower “forgot” to mention.
Detect Fraud Early
The sooner fraud is detected, the less money is lost. Field investigations weed out fraudulent applications early by identifying:
Falsified documents like bank statements, pay stubs, or tax returns. These are harder to fake in person versus submitting digital copies.
Suspicious activity like frequent job changes, living beyond means, or hiding assets to appear eligible.
Shell companies set up to hide income or launder money. Searching business records reveals who really owns and controls the company.
Build Stronger Cases
If fraud is suspected, field investigations provide concrete evidence to build a case. Photos, recordings, and detailed reports from an investigator carry more weight than discrepancies on paper. This evidence helps in actions like:
Denying the loan application with cause. Concrete proof of fraud justifies rejecting the borrower.
Pursuing criminal charges if serious fraud was committed. Physical evidence significantly aids prosecution.
Recovering losses from insurance claims related to fraud. Insurers require substantial evidence of wrongdoing before approving a payout.
Field investigations are well worth the investment for any lending institution serious about fraud prevention and loss mitigation. Identifying fraudulent activity upfront avoids costly surprises down the road. With technology like video calling, live streaming and high-resolution photos, tele verification provides many of the same benefits as in-person inspections at lower cost and risk. Combining on-site and virtual verification creates the most comprehensive fraud detection program.
Conducting Effective Tele Verifications on Loan Applicants
Conducting effective tele verifications on loan applicants is crucial to prevent fraud and ensure only qualified borrowers are approved. As an LOS, Celestiq allows lenders to easily verify information provided by applicants over the phone.
Contact Information
To start, make sure you have the correct phone number for the applicant on file. Double check that the number matches what the applicant provided on their initial application. If not, this could be a sign of fraud and the application may need additional scrutiny.
Prepared Questions
Come prepared with a list of questions to ask the applicant based on the information in their application. Ask for details about their employment, income, current living situation, etc. Listen for any inconsistencies in their answers compared to what they submitted. Ask open-ended questions to get the applicant talking, which can reveal useful details.
Listen for Warning Signs
Be on alert for any signs the applicant may not be truthful. Nervousness, lack of details or specifics in their answers, refusal to provide information, getting defensive—these could all be red flags. Politely but firmly ask follow up questions if their answers seem suspicious.
Take Thorough Notes
Document everything discussed during the call. Write down answers, details provided, your impressions, and indicators that either verified or contradicted information on the application. These notes will be important for the underwriter to review as part of the final decision.
Ask for Supporting Documentation
If permitted in your process, ask the applicant if they can provide any documentation to support what was discussed, such as pay stubs, bank statements, tax returns, etc. Let them know providing this documentation can only help their application. Their willingness or refusal to provide documents can also be telling.
Conducting tele verifications, when done properly, is one of the most effective ways to prevent fraudulent applications from slipping through the cracks. Taking the time to thoroughly vet applicants over the phone using Celestiq can save your lending institution significant time, money, and reputational damage down the road.
Top 5 Red Flags That Trigger Field Investigations
As a loan originator, it’s critical to verify the information provided by your borrowers to prevent fraud and ensure compliance. Some applications may raise red flags that warrant further investigation. The top 5 signs that should trigger field investigations in your loan origination system include:
Inconsistencies in the Borrower’s Information
If the details the borrower provides don’t quite match up, it’s worth looking into. Things like different addresses, phone numbers, or employers listed on various forms can be a cause for concern. Your loan origination software like Celestiq LOS allows you to easily compare data across documents to spot these discrepancies.
Sudden or Frequent Changes in Information
If a borrower’s information changes multiple times during the application process or important details like income or employment change abruptly, it may indicate fraud. Your system’s audit trails and versioning features give you visibility into how and when these changes were made.
Unable to Verify Information
If you’re unable to verify critical details provided by the borrower through standard checks, it warrants further review. For example, if an employer listed doesn’t exist or you can’t source income documents to support the borrower’s reported earnings. In these cases, your system’s field investigation tools can be used to dig deeper.
Living Outside Affordability
If a borrower’s reported income doesn’t seem to reasonably support their living expenses, especially for the loan amount requested, it’s a sign that further verification is needed. Your system can analyze the full financial picture to determine if the numbers add up.
Questionable Property Information
Inaccurate property details, like an incorrect address or legal description, can be a sign of potential fraud, especially for investment properties. Your system’s property data verification features, including geospatial analysis, can validate the actual characteristics of the property to ensure it matches what the borrower has provided.
Field investigations and tele verification enabled by your loan origination system are key to uncovering red flags and possible fraud to protect your business and comply with lending regulations. Software with robust verification capabilities, audit trails, and risk analysis gives you the tools you need to do your due diligence on every application.
Integrating Field Investigations Into Your Lending Workflow
Field investigations are a crucial part of preventing fraud in the loan origination process. As a lender, you’ll want to verify information provided by the borrower through on-site inspections. Having loan officers or third-party agencies conduct field investigations helps ensure data accuracy and reduces risk.
Conducting Effective Field Investigations
To properly conduct field investigations, your loan origination system should have functionality that allows loan officers to:
Schedule and assign field investigation requests. The system should automatically prompt for a field investigation based on certain application details. Loan officers can also manually request an investigation if needed.
Provide detailed information about the property and borrower to the investigator. This may include the property address, names of occupants, income details, etc. The more information provided upfront, the more effective the investigation.
Track the status of field investigations. Your system should allow loan officers to see which investigations have been requested, assigned, and completed. This helps avoid duplication of work and ensures no investigations fall through the cracks.
Review and evaluate the results of field investigations. Investigators will compile details about the property and occupants. Loan officers must analyze this information to determine if anything raises red flags about the application. They can then request follow up documentation or take further action as needed.
Archive results of past investigations. Having a database of historical investigation results allows lenders to spot patterns that may indicate fraud. If a borrower has a history of providing false information on applications, lenders can proceed with extra caution.
Conducting thorough field investigations, whether in-house or through a third-party, should be an integral part of your lending workflow. Integrating this functionality into your loan origination system streamlines the entire process and gives lenders valuable insight into applications to prevent fraudulent loans. By verifying information upfront, lenders can avoid risky loans that lead to default or foreclosure down the road.
Choosing a Loan Origination System With Built-in Field Investigation Tools
When choosing a loan origination system, look for one with built-in field investigation tools. These help verify the information provided by applicants and reduce fraud, saving you time, money, and headaches.
Field Agents
The best systems employ field agents to physically inspect properties. They can check if the information on the application matches the actual home or business. Does the property actually exist? Does it appear to be owner-occupied or a rental? What is the general condition and estimated value? Field agents provide an objective set of eyes to confirm what’s really happening on the ground.
Telephone Verification
In addition to field agents, many systems offer telephone verification of employment and income. Loan officers place calls to applicants’ employers to confirm position, length of employment, salary, and other details. They may also call personal and business references provided on the application. Speaking directly with these contacts is the surest way to verify someone’s statements and check for any discrepancies.
Fraud Detection
With field investigation and telephone verification built-in, a loan origination system can incorporate additional fraud detection measures. It may flag applications that seem too good to be true based on statistics, or those with information that doesn’t quite add up. The system can also watch for duplicates from the same applicant, or catch people who provide different information to different lenders.
Ultimately, choosing a system with tools to verify applicant information on the front end will save you from headaches on the back end. Field agents and telephone verifiers work to prevent fraudulent applications from slipping through the cracks in the first place. And if any “red flags” are detected, you’ll know right away so you can ask follow up questions, request additional documentation, or deny the application before valuable resources are wasted. Using a system with built-in fraud prevention measures helps ensure that the loans you approve are made to qualified, honest applicants.
Key Features to Look for in Field Investigation Technology
Field investigation and televerification features are must-haves in any robust loan origination system. These built-in tools allow lenders to verify information provided by borrowers during the application process, reducing fraud and ensuring compliance.
On-site property inspection
Sending an investigator to personally inspect the property helps validate the accuracy of details provided about the home’s condition, square footage, and features. The investigator can spot any discrepancies between what the borrower claimed and the actual property specifics. They will also check to ensure the property is actually owner-occupied, if that was a requirement of the loan.
Income and employment verification
Calling an applicant’s employer or accountant to confirm their job, salary, and other income sources is key. Many borrowers may exaggerate their income to qualify for a larger loan amount. Televerification, done over the phone, allows the lender to verify the accuracy of the income information in the application.
Asset verification
In addition to income, lenders need to confirm that applicants actually have the assets, like savings accounts, investments, and retirement funds, that they listed in their application. Televerification calls to financial institutions holding those accounts will determine if the asset values and types (liquid or non-liquid) were reported correctly.
Occupancy verification
If the property was meant to be owner-occupied, the lender should verify this fact. A phone call to neighbors, rental tenants, property managers, or homeowners associations can help determine if the borrower does indeed live in the home. Failure to do so could indicate possible fraud like straw-borrowing.
The bottom line is that field investigation and televerification features, when built into a loan origination platform, give lenders the tools they need to properly validate information from borrowers. Preventing mortgage fraud and ensuring compliance with regulations leads to a healthier loan portfolio and fewer risks for the lender in the long run.
Field Investigation and Tele Verification FAQs
So you’ve decided to invest in a loan origination system with field investigation and tele verification features. Excellent choice! These capabilities will give you peace of mind that the information provided by your borrowers is accurate before approving and funding loans. Here are some commonly asked questions about field investigation and tele verification:
What exactly are field investigation and tele verification?
Field investigation involves sending an agent to physically verify information on the loan application, like the borrower’s address and employment. Tele verification uses phone calls to validate details with employers, landlords, and other contacts.
Why are these features important?
They help detect and prevent fraud by verifying that the information submitted by the borrower matches up with the facts. This lowers the risk of approving a loan based on falsified details. With rising fraud rates in lending, field investigation and tele verification have become must-have capabilities in an effective loan origination system.
What types of information can be verified?
Common items include the borrower’s identity, income, employment, residence, and property value. Agents can check government-issued IDs, pay stubs, property records, and more. Over the phone, they can speak to HR departments, property managers, and neighbors to confirm details.
How often are verifications performed?
For the majority of loans, a basic level of reverification is recommended. Higher risk loans may require more in-depth checks. Many lenders have verification criteria and thresholds based on factors like loan amount, LTV ratio, credit score, and inconsistencies detected in the application.
Does the borrower’s permission need to be obtained?
Yes, the borrower must provide consent for the lender to conduct field investigation and tele verification. The specifics of what will be verified should be outlined in the initial loan application and documentation. Borrowers have the right to dispute any incorrect information collected during the verification process.
Using a capable loan origination platform with built-in field investigation and tele verification features like Celestiq LOS will empower you to make well-informed lending decisions, reduce fraud, and have confidence in the accuracy of your portfolio.
Conclusion
You’ve now learned all about how field investigation and Tele verification can help prevent fraud in loan origination and keep your business compliant. With these features built right into your loan origination software, you’ll have peace of mind knowing that every application is thoroughly checked and verified before approval. No more worrying about fraudsters slipping through the cracks or penalties for non-compliance. By implementing a system with field investigation and Tele verification, you’ll streamline your lending process, reduce risk, and set your business up for long term success. What are you waiting for? Choose a loan origination solution with these must-have features and fraud prevention safeguards today. Your business and customers will thank you.
