
Between 2022 and 2023, there was an over one-third increase in attempted mortgage fraud, with fraudsters going back to traditional methods to commit the crimes.
While corporations are increasingly wary and are concentrating their efforts on deterrence, it hasn’t stopped swindlers from devising new tricks up their sleeves, resulting in a rise in fraud cases, according to a recent Lexisnexis Risk Solutions report.
“Fraud morphing into new forms increases the threat of losses for both the financial institutions and their clients,” said Kimberly Sutherland, Vice President of Fraud and Identity Strategy at Lexisnexis Risk Solutions, in a press statement.
“Despite attempts to raise consumer awareness, our study indicates organizations are grappling with international scams and transactions fraud.”
In the housing loan sector alone, companies witnessed on average 2,619 monthly fraud attempts in the recent year, marking a 34.6% uptick from 1,946 in the prior year. From the total average, 1,417, or 54%, were successful, while 1,202 were intercepted.
The growth rate surpasses that seen in banks and investment firms, but lags behind other credit lenders, which have observed the quickest rate of increase and highest number of attempts, with a tally of 3,271.
Every dollar put towards addressing and resolving fraud costs mortgage firms an average of $4.36. The cost was slightly lower in 2022, averaging $4.20. Banks, in comparison, experienced only a minor uptick from $4.36 to $4.40.
While fraudulent activities happen throughout various stages of customer interaction, new account creation is linked to 43% of total losses, up from 34% in 2022. Attempts during the account login process accounted for a 31% share, and during the funds-distribution phase 26%.
There was a resurgence in age-old techniques in the past year, with phone fraud skyrocketing across industries. Successful phone fraud accounted for 28% of losses at mortgage lending institutions, a significant increase from 11% the previous year. Banks, likewise, reported an increase from 12% to 26%.
According to the report, 65% of U.S. financial institutions identified phone calls as the scammers’ preferred method.
Online scams were linked to 29% of related losses, a minor increase from 28%. However, mobile-related threats declined from 36% in 2022 to 20%, hinting at successful counter-measures implemented by financial firms, Lexisnexis’ research revealed.
Despites strides made in uncovering and preventing fraud, the increasing number of attempts highlights how criminals are continually staying ahead of businesses by shifting tactics to exploit weaknesses. Decreasing profits in the lending industry prompted some companies to cut back on security expenditure, while the advent of new artificial-intelligence enabled technologies may have assisted the fraudsters.
The increase in over-the-phone scams has corresponded with the rise in instances where the perpetrator impersonates their victim. This fraud type, known as synthetic-identity fraud, resulted in a 36% loss share during funds distribution at mortgage lenders. Over two-thirds of mortgage firms also ranked it as one of the top methods employed by swindlers during customer interactions.
International mortgage fraud cases escalated to a 46% share in 2023 from 16%, which coincided with the widespread challenges of evaluating risk by country or region and a scarcity of specialised prevention tools, the report highlighted.
Organized scams persistently contribute to widespread losses, despite efforts towards consumer education. Sixty-seven percent of mortgage lenders reported witnessing most scam attempts at the account opening stage.
Mortgage-related losses from organized scams constituted 38% of the sector’s total, surpassing the banking sector’s rate of 32%. Overall, such scams accounted for 35% of fraud costs for all financial businesses across North America, with six out of ten institutions noticing an increase in organized scam attempts in 2023.
Mortgage lenders are more aware of the threats posed by organized scams and have increasingly adopted measures to mitigate risk compared to a few years ago. Half the companies in the mortgage sector have employed consumer education, internal staff training and artificial intelligence modeling in their scam-prevention strategies.