How To Prevent The Straw Buyer Scam With Forensic Accounting

Posted on: 11 April 2017

Abusive lending practices affects consumers, financial institutions, mortgage fraud victims, and other lenders. This results in the mortgage industry losing millions of dollars because of this type of corruption. The straw buyer scam is one of the most common types of mortgage fraud schemes. Read on to find out how to prevent this type of fraud with forensic accounting.

What Is The Straw Buyer Scam?

A straw borrower takes on another person's identity for mortgage purposes. He or she does this by using the person's information to obtain financing. This information includes social security numbers, counterfeit drivers' license, pay stubs, W-2 tax forms, tax returns, bank statements, rent checks, earnest money checks, and verification of mortgage, rent, and employment. Scammers can even falsify property ownership records. A borrower also can obtain a fraudulent mortgage on a property without owning or occupying it.

What Is Forensic Accounting?

If you think mortgage fraud is going on in your office, then you need to contact a forensic accountant. Forensic accountants use accounting skills to investigate embezzlement and fraud. It is done by analyzing financial information, which can be used for legal proceedings.

How Does Forensic Accounting Help With The Straw Buyer Scam?

To carry out the straw buyer scam, you have several people involved in the fraud. A loan officer can play a key role in this scam going down. Loan officers can be paid by commission, salary or both. In some cases, loan officers are compensated only by commission. The purpose of the mortgage fraud is to make money.

It is important to check the transactions and activities of your mortgage company on a regular basis. You want to make sure loan officers are complying to the rules and regulations. Reviewing transactions helps with catching fraud. One sign of fraud is a significant increase in loan approvals.

If something raise red flags after doing an audit, then the accountant will use forensic research to trace the transactions. Forensic research is the use of scientific knowledge and methodology during a criminal investigation. This type of investigation can also identify assets so that you can recover losses.

Forensic accountants work similar to an investigator. At the end of the investigation, you are presented with a report of their findings. They can also provide analytical data for legal proceedings and testify in court.

Mortgage fraud affects everyone from the banking to real estate industry. It is important find the culprits and put an end to the fraudulent activities.