Aug. 30: Fraud is fraud is fraud... the WSH weighs in; third-party provider updates; a fine made-up Ghandi tale
If you think originating a mortgage is complicated, try combining water rights, politics, and extinction. The nation of Azerbaijan is raising fears about the health of the largest salt lake in the world, the Caspian Sea. The level of the sea has fallen by three feet (0.93 meters) in the past five years and by over eight feet over the last 30 years. The country is attempting to negotiate with Russia, which has significant control over the sea level since Russia is able to dam the Volga River, which provides 80 percent of the water entering the lake. There are 15 million people who live in the Caspian region as a whole, and 4 million who live on the coast of Azerbaijan. Sturgeon, already threatened with extinction, lose up to 45 percent of their summer and autumn habitats and are cut off from spawning grounds owing to the Russian damming.
Since when did fraud become politicized or ignored?
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Don’t answer that; there’s plenty of blame to go around. Frankly I’ve been amazed at the emails I’ve received supporting Fed Governor Lisa Cook in the face of President Trump firing her. As well as the emails supporting Texas Attorney General Ken Paxton and his estranged wife Angela claiming three houses as “owner occupied.” And let’s not forget Adam Schiff and Letitia James. But what about Pulte Homes, or Freddie Mac or Fannie Mae, which Bill Pulte oversees?
This week the Wall Street Journal questioned if it is only Democrats that fudge on mortgage applications? If mortgage misrepresentations are this common, it’s an indictment of Fannie Mae and Freddie Mac.
“Federal Housing Finance Agency (FHFA) director Bill Pulte has access to these files because he oversees Fannie and Freddie, which combined guarantee about half of single-family mortgages. If Mr. Pulte can flyspeck mortgage inaccuracies, why didn’t lenders or the two government-sponsored enterprises he regulate?” (Let me know if you don’t have a subscription and want to read the article; I can send it along.)
From Indiana, industry vet Carol K. weighed in:
“Many will say that the Texas AG Paxton guy seems rather slimy. The couple also holds mortgages on two houses in Austin, each of which they also called their primary address. Those houses appear to be rental properties, based on online listings. Mr. Paxton has disclosed rental income from two Austin sources on his financial disclosure documents.
“So, I've been thinking about this primary residence kerfuffle, and it seems to me that the mortgage company will have to take some of the responsibility here. Why? As I recall, occupancy was always closely scrutinized by underwriters when people owned more than one property. In addition to a tri-merge, which would show current and closed mortgages, there are also other databases that are way scarier, showing all sorts of information about people, including residences whether owned or rented. It wasn't that infrequent that I had to ask borrowers to verify that former addresses were places they rented but didn't own. I remember once that a couple owned a property free and clear somewhere in the wilds of the Smoky Mountains, and they had to explain ownership of that property, which they had not included on their application.
“Where I'm going with this is that the lender is often (and should be) aware of all properties owned, whether they have a mortgage or not. And they would ascertain which is the primary residence before issuing an approval. Typically, wherever the owners are registered to vote determines which property is the primary residence. Simple. Usually, underwriters are sticklers about this issue, so in these cases, did the lender wink and say, ‘OK, we'll call that a primary residence’?
“Also, there's the distinction of a second home (vacation home). I believe that when I was a lender, interest rates for second homes were the same as primary residences. I think that changed in 2022. That said, it seems that second home rates are still less than investment property and only 0.25-0.50 percent higher than primary mortgages.
Typical fraudulent activities associated with this category in the SAR filing sampling are appraisal fraud, fraudulent flipping, straw buyers, and identity theft, per fincen.gov. I've also read that the usual course, once a bank determines occupancy fraud has occurred, is to call the loan or make the borrowers pay the interest that they should have paid. The case is seldom sent to the FBI, unless the borrower won't make restitution or there is evidence of multiple occupancy fraud situations.
“Finally, here's an overview of the issue. Lenders determine if a property is a primary residence through a combination of loan application information, supporting documentation, and underwriting analysis. They look for consistent indicators like occupancy within a specific timeframe, matching addresses on legal documents, and proximity to work or family, ensuring the property aligns with the definition of a primary residence.
Here's a more detailed breakdown of what lenders should examine. Loan application and intent. Lenders first inquire about your intended occupancy on the loan application. You must truthfully state whether the property will be your primary residence. Underwriters then assess whether your stated occupancy makes sense given your other information and the property's characteristics.
“Occupancy verification methods include utility usage (lenders may review utility bills like electricity, water, gas to verify consistent usage at the property address, address consistency (the address on your driver's license, voter registration, tax returns, and other legal documents should match the property address), proximity to work/school (living near your workplace or children's school strengthens the claim of primary residency), and time spent at property (borrowers are expected to live in the property for the majority of the year).
“Lenders also look at mail and bills (receiving most of your mail at the property address, including bank statements, is a positive indicator), documentation (providing documents like tax returns, utility bills, driver's license, and voter registration helps prove occupancy), field verification (in some cases, lenders may conduct physical site visits to verify occupancy).”
Carol’s note continued. “Social media may offer insights into occupancy patterns, as can video interviews. The lender's underwriter analyzes all provided information to ensure the property qualifies as a primary residence. The IRS also has guidelines for primary residence, including living there for the majority of the year and using the same address on tax returns and other legal documents. The IRS may review tax returns and request documentation like mortgage statements, utility bills, and voter registration to confirm primary residence. I'm saying that I don't believe that the responsibility lies completely with the borrowers. The lender has a hand in this.” Thank you very much, Carol!
Federal Reserve Board final individual capital requirements
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Following its stress test earlier this year, the Federal Reserve Board announced final individual capital requirements for large banks, effective October 1. These requirements are based on the results of the Fed's stress tests, which assess banks' capital needs through risk-sensitive and forward-looking analyses. In an effort to reduce year-over-year volatility, the Fed proposed averaging stress test results over two consecutive years, which, if finalized, will result in an update to capital requirements based on the averaged results. This move aims to enhance transparency and stability in the capital requirements process.
The capital requirements include several components: the minimum capital requirement (4.5 percent), a stress capital buffer (at least 2.5 percent), and, for the largest banks, a capital surcharge tied to their systemic risk. If a bank's capital falls below the total requirement, it faces automatic restrictions on capital distributions and bonus payments. Morgan Stanley's stress capital buffer was excluded from the announcement due to the firm’s request for reconsideration, with a final decision expected by September 30, 2025.
Third-party provider developments: who’s doing what?
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What lenders don’t rely on outside parties for their business? Let’s take a random look at who’s up to what.
The 2025 STRATMOR Technology Insight® Study is now underway. The first part of the study (the Lender Intelligence Survey) is live and focused on how lenders really feel about the tech they use every day. Lenders who complete the survey will receive a summary report of 2025 Technology Insight® Study results at no cost. This is actionable intel to help guide tech decisions in today’s competitive environment. Take the survey and help shape the future of mortgage tech. The survey is open to lenders only. Questions? Reach out to STRATMOR’s Technology Insight team for details: technologyinsights@stratmorgroup.com.
By the way, as a quick aside, if you are looking to obtain a FNMA seller/servicer approval or have an internal title insurer vetting process that requires you to maintain risk information on title insurers, Secure Insight offers risk profiles on national and regional insurers which include independent financial stability ratings. Contact Amanda Padd or visit Secure Insight.
MISMO® announced the release of the Automated Valuation Model (AVM) Common Confidence Score Standard and Guidance developed through collaboration with industry stakeholders. The new standard is designed to help mortgage originators and other stakeholders evaluate AVM risk more effectively and consistently, supporting industry-wide adoption and regulatory compliance. VM Confidence Score Standard improves risk communication, supports compliance with Fair Lending laws and the Dodd-Frank AVM Rule promoting Promotes consistent validation of AVM confidence scores across the industry.
Asurity Technologies, LLC® ("Asurity®"), a leading provider of mortgage compliance technology, announced the successful integration of RegCheck®, Asurity's real-time loan-level compliance solution, with Calyx Path®, the enterprise-grade, cloud-based loan origination system (LOS) from Calyx®, a trusted name in mortgage technology for banks, credit unions, mortgage bankers, and brokers. This integration empowers lenders using the Calyx Path LOS to initiate compliance checks, quickly access results, reduce risk, and keep loans moving efficiently toward closing.
Tavant announced that the company and Snapdocs have partnered to create a seamless end to end digital mortgage infrastructure. This new integration connects the Snapdocs eClosing platform with Tavant’s FinConnect to automate and accelerate mortgage workflows. Through this partnership, the Snapdocs eClosing platform now integrates with Tavant’s FinConnect, giving lenders seamless connectivity across their entire tech stack including POS, LOS, document providers, and other third-party or proprietary systems.
Informative Research announced the addition of The Work Number® Report Indicator from Equifax to its integrated suite of mortgage credit and verification tools. The Work Number Report Indicator empowers lenders by delivering a first-in-market solution: an Equifax credit report alongside an indicator of employment status earlier in the mortgage qualification process. By informing mortgage lenders upfront if an applicant has a verification of employment and income (VOIE) record on The Work Number database, The Work Number Report Indicator gives lenders a more complete view of the borrower earlier in the process. This added context supports better informed lending decisions, streamlined verification ordering, and an improved borrower experience.
Unlock Technologies (Unlock), a financial technology company offering a flexible way to access home equity, is now providing home equity agreements (HEAs) in five additional states: Hawaii, Idaho, Montana, New Hampshire, and Wyoming. Following the addition of Kentucky, Indiana, Missouri and Ohio earlier this year, Unlock HEAs are currently available in 24 states, representing a more than 40% increase over 2024. To help drive future expansion and meaningfully engage homeowners across its expanded footprint, Unlock has welcomed Miren Desai as its first-ever chief growth officer. In this new position, Desai will oversee all aspects of growth and revenue operations, partnering closely with sales and product to introduce more homeowners to this category-defining home equity-based financing. Desai recently held leadership roles at LendingClub, Nextdoor and Funding Circle in addition to previous positions at Fortune 500 banking and credit card companies.
Protect against lost promissory notes with DocMagic’s SmartSAFE®. Not just any eVault solution, it’s DocMagic’s secure repository to store and manage all electronic records. Documents retain their integrity, validity, and authenticity throughout the life of the loan. Direct MERS® eRegistry integration so you can sell and eDeliver loans faster. Providing increased transparency with flexible, automated reporting.
SettlementOne, a leading provider of credit reporting and mortgage verification services announced the expansion of its partnership with Truv to include comprehensive asset verification capabilities. The new solution provides mortgage lenders with instant access to borrower asset data from over 13,000 financial institutions, featuring 90-day free data refreshes. The solution provides support for Freddie Mac LPA AIM and Fannie Mae Day 1 Certainty, offers direct connections to 13,000+ financial institutions, up to two years of account history, and customizable reporting options, including configurable thresholds for large deposits and withdrawals, transaction categorization, and the ability to leverage direct deposit data for employment verification. The asset verification solution is available now through SettlementOne's existing platform.
Lender Toolkit officially launched its rebranded solution suite and market positioning as the only Mortgage Efficiency Cooperative in the industry. This bold move aims to eliminate vendor fatigue, integration headaches, and the chaos of piecemeal tech stacks. Lender Toolkit's newly formalized cooperative model includes Prism – An all-in-one automation engine for data, income, asset analysis, and decisioning. Disclosure Automation – Ensures compliant and timely disclosures while cutting costs. Post Close Automation & Investor Delivery – Speeds up delivery and improves data integrity. PowerTools™ – Plug-ins that supercharge your LOS. Professional Services – Hands-on consulting, admin support, LOS web readiness, and workflow optimization.
Together, these solutions eliminate silos, reduce overhead, and empower lenders to streamline their workflows without having to piece it together themselves.
Argyle and LenderLogix announced a new integration that brings automated income, employment, and asset verification directly into the LiteSpeed point-of-sale (POS) platform. This partnership enables banks, credit unions, independent mortgage banks and brokers to embed VOI, VOE and VOA at the very start of the mortgage loan process; no portals, emails, or manual uploads required. The result is faster application experiences for borrowers and more complete, high-quality loan files from day one.
MortgageFlex Servicing Release 9.0 added numerous enhancements and integrations to the MortgageFlexONE Servicing software application. This release has significant updates, including more workflow queues, robust new tools, reports, functions, and integrations. MortgageFlex will do one more release before year's end.
The Wit of Gandhi (The quotes may be apocryphal but still enjoyable.)
"He who stops to ponder and think will generally come out ahead."
When Gandhi was studying law at University College, London, a Caucasian professor, whose last name was Peters, disliked him intensely and always displayed prejudice and animosity towards him. Also, because Gandhi never lowered his head when addressing him, as he expected, there were always arguments and confrontations.
One day, Mr. Peters was having lunch in the dining room of the University, and Gandhi came along with his tray and sat next to the professor.
The professor said, "Mr. Gandhi, you do not understand. A pig and a bird do not sit together to eat."
Gandhi looked at him as a parent would a rude child and calmly replied, "You do not worry professor. I'll fly away," and he went and sat at another table.
Mr. Peters, reddened with rage, decided to take revenge on the next test paper, but Gandhi responded brilliantly to all questions.
Mr. Peters, unhappy and frustrated, asked him the following question. "Mr. Gandhi, if you were walking down the street and found a package, and within was a bag of wisdom and another bag with a lot of money, which one would you take?"
Without hesitating, Gandhi responded, "The one with the money, of course."
Mr. Peters, smiling sarcastically, said, "I, in your place, would have taken wisdom, don't you think?”
Gandhi shrugged indifferently and responded, "Each one takes what he doesn't have."
Mr. Peters, by this time was beside himself and so great was his anger, that he wrote on Gandhi's exam sheet the word "idiot" and gave it to Gandhi.
Gandhi took the exam sheet and sat down at his desk trying very hard to remain calm while he contemplated his next move.
A few minutes later, Gandhi got up, went to the professor, and said to him in a dignified but sarcastically polite tone, "Mr. Peters, you signed the sheet, but you did not give me the grade."
Wit always wins over anger.
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