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Fraud Prevention Requires Transparency

FNC Touts Solutions Geared Towards Collateral Transparency

Oxford, Miss. (Sept 18, 2008) From bailouts to buyouts, the current mortgage crisis has economic experts buzzing; and they all seem to agree on one thing: Fraud.

The "failure to enforce laws against fraud has been a disaster," Ben Stein, economist and CBS Sunday Morning commentator, said on the Larry King Live show last night. "This whole mortgage (problem) was fraud. We have got to say, 'No more fraud.'"

A self-described fiscal conservative, Stein is not always in agreement with former secretary of labor for the Clinton administration, Robert Reich. Now a professor at the Goldman School of Public Policy, Reich differs with Stein on many economic viewpoints; but they both agree that fraudulent lending practices are to blame for the mortgage mess.

"Instead of bailouts and subsidies, I'd much rather have regulation," says Reich. "Full disclosure, capital requirements, transparency. We have had none of this. Instead we have had a kind of reaping the whirlwind of a lack of oversight."

Reich clarifies his statement in the US News & World Report, saying: "Our financial system has to be transparent."

Lenders Turn to FNC to Ensure Transparency
Since 1999, mortgage technology company FNC, Inc. has provided the nation's major lenders with transparency of real-estate collateral throughout the life of the loan, according to the company's CEO Bill Rayburn.

In bank-speak, collateral is the house or property --the asset -- that supports the loan. Transparency means that all the details about that asset (sales price, size, neighborhood characteristics, etc.) can be easily accessed by anyone involved in the origination and servicing of the loan.

FNC's Collateral Management System (CMS) for enterprise lenders and its Collateral Headquarters (CHQ) platform, designed for regional and community banks, provide the collateral transparency mortgage lenders need, while also helping to ensure compliance to regulatory guidelines and allowing lenders to mitigate risk associated with fraud.

"Documentation of the entire loan process is critical, as is evidence of appraiser independence, compliance to USPAP standards, and indications of appraisal or appraiser violations," Rayburn said. "We provide clients with solutions for all of these issues."

FNC's Rules-Based GAAR(R) Program Diminishes Risk of Fraud
In early 2005 FNC released the Generally Accepted Appraisal Rules(GAAR) to provide lenders with the ability to automate the appraisal review process. The rules were categorized into two groups: risk and compliance. The GAAR risk rules screen appraisals for red flags that may indicate fraud or overvaluation; inconsistent appraisals; and deviations from the norm.

"The risk rule set is based on industry best practices for appraisal review along with the extensive experience of the appraisers developing the rules. The intent was to develop a comprehensive set of rules that identifies risk issues within appraisals that may reflect on the valuation opinion provided by the appraiser," said Kathy Coon, SRA, former Appraisal Institute chair of education who now serves as FNC's chief appraiser and GAAR series lead developer.

The GAAR compliance series screens appraisals for compliance with banking and thrift regulations; Fannie Mae and Freddie Mac guidelines; and USPAP.

Now, more than ever, FNC's collateral management platforms, collateral transparency products, and GAAR Compliance and Risk series are critical to anyone interested in access to accurate, up-to-date appraisal information at every phase of the loan cycle throughout the life of the loan.


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