Over one-quarter of the consumer respondents to a Mphasis Digital Risk survey admit they are willing to bend the truth in order to
This could be considered shocking, even as the causes of the Great Financial Crisis fade further into memory. Among the roots of that late-2000s debacle was misstatements on mortgage applications, especially with certain products like no income/no asset verification loans that encouraged deceptiveness, also known as "liar loans."
Even with tighter product underwriting standards as a result,
The survey was conducted in November on a broad range of housing topics and garnered approximately 1,600 responses.
And that timing might be part of the reason why that question garnered those responses, as mortgage rates were approaching 8% for the 30-year fixed, and home prices were (and are) still rising with a competitive market driven by the inventory shortage, impacting affordability, noted Kimberly Lanham, senior vice president of marketing and client relations. The
People were doing what "they can in the gray area of getting a lower rate, or somehow figuring out how to get their offer accepted," Lanham said.
The question also was about the cost of buying a house, not necessarily that of getting a mortgage, said James Jajtner, vice president, operations and managers due diligence at Mphasis Digital Risk.
"There's checks and balances that go into place when you are trying to get an appraised value, when you're completing that sales contract," Jajtner said. It shows the importance for lenders, especially third party originators, to stay on top of their guidelines and have those external checks as part of the process, especially if the loan is being securitized.
In a follow up question about what would they do if someone during the mortgage lending process advised them to enter inaccurate or misleading information in order to improve your chances of approval or achieve better terms, less than half, 41%, unequivocally answered they would disagree and not follow along.
Slightly more than 16% admitted they would follow along, and 20% would seek other opinions. Almost 14% said they would ask for an attorney's advice, while 7.66% claimed they didn't know what they would do.
Another question could be as much as about
When asked if the lender cared about you and your ability to pay off the mortgage in a timely manner, 29.6% said somewhat and 20.9% responded not at all. Just 23.4% said the lender cared very much. The remaining 26% do not have a mortgage.
But the good news, Lanham noted, is that no tick up in mortgage fraud is taking place right now.
"The reason that we've been able to kind of weather the interest rate storm that we've been having for the past couple of years, even through the craziness of COVID is because underwriting standards were so shored up and so many checks and balances were put in place that we are still seeing very safe, correctly underwritten loans," said Lanham.
The mortgage loan critical defect rate, a marker that consumers and/or industry insiders might be making deliberate misrepresentations on applications, declined 6 basis points in the second quarter of 2023 to 1.78%, a report issued in mid-December by Aces Quality Management stated.
Defects related to income and employment remained by far the single largest source of misrepresentations, at a 31.25% share in the second quarter, slightly down from
The second most cited category was assets, at just under 16%.
"At a time when every loan originated matters, lenders are taking quality control seriously and doing all they can to prevent buyback requests from the government-sponsored enterprises," said Aces Executive Vice President Nick Volpe in a press release. "Critical defect rates continue to trend in the right direction, and now, with interest rates trending down at the time of this report, we're looking forward to seeing lenders maintain high loan quality as the market once again changes."
Mphasis Digital Risk's Jajtner agreed. "I think we're going to be coming into a really solid 2024 from an originations standpoint," with mortgage rates likely to decline fueling activity.
It is up to participants across the board, from lenders, to aggregators and securitizers, that "everything is up to par from an operational standpoint just to ensure that we can originate, review and securitize safe, complete, accurate loans," Jajtner said.
