(April 2, 2007) -- In today’s housing market, banks and lending institutions can’t afford to lose money and the latest scam in mortgage fraud has the potential to drain pockets in an industry trying hard to keep its head above water. In today’s edition of FraudFacts, we take a look at the growing problem of multi-closing fraud, also known as “shot gunning”, title gap fraud or multi-lien fraud.

Shot gunning Loans: Scam Artists vs. Multiple Lenders
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In this new mortgage fraud scenario, scam artists apply for multiple home equity loans with multiple lenders at the same time. Their credit and the loan are often clean, facilitating a fast closing process. Due to the delay between the dates the loans are closed and the dates the liens are filed in the county courthouse, lenders are not aware of the other liens when making their underwriting decisions.

These fraud perpetrators can walk away with millions of dollars in profit from one property, and the worst part is, each lender originates the equity loan and approves an amount believing they are in second lien position. If they are not in that position they may not have collateral protection against their loss if the loan defaults.

However, there is a solution. The answer lies in alerting the lenders BEFORE they give a loan to someone who may be applying for the same loan elsewhere.

Shooting Down the Fraud: Giving Lenders the Upper Hand
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A new tool from First American CoreLogic called Multi-Closing Alert proactively delivers notifications to a lender identifying potential multiple closings from other participating lenders. As the industry’s first official multi-closing prevention program, this tool helps lending institutions such as Wells Fargo and Chase stop these scams before they can take the cash and run.

SOURCE: CoreLogic