FundingShield: Nearly Half of Transactions at Risk
(Illustration courtesy of FundingShield)
During the fourth quarter, 45.5% of transactions on a $84.1 billion portfolio comprising residential, commercial and business purpose loans had issues leading to a risk of wire & title fraud, according to FundingShield, Newport Beach, Calif.
On average, problematic loans had 2.2 issues per loan, indicating the lack of appropriate controls by closing agents and lenders to identify and fix issues, FundingShield’s Q4 2024 Wire Fraud Risk Report said.
The fourth quarter saw record-high risk levels for CPL validation related errors (10.3% of transactions) for critical data points such as borrower information, vesting / vested parties, non-borrowing parties on title, property addresses, borrower information and more. “This is another example of a lack of accuracy between lender and title systems alongside the CPL issues that remained at all-time high levels in the last quarter of 43.7% of transactions,” the report said.
There were wire-related errors at 8.1% of transactions in the quarter, the fifth straight quarter with over 8% for this category. License issues remained at elevated levels from Q3 to Q4 2024 due to entities having lapsed, terminated, or suspended licenses and inconsistent data when verified with registrars, insurance regulators and licensing bodies. These persistently high levels combined with the CPL Validation and key data element mismatch highlight the need for source data verification in workflows and for trusted data sets being used as part of critical processes, FundingShield said.
Fundingshield CEO Ike Suri noted natural disasters, adverse weather and recent fires have created emergencies that attract fraudsters and cyber criminals who exploit vulnerable parties and infrastructure. “There is a need for loan-level safeguards to protect the mortgage industry against constantly evolving threats as evidenced in our all-time high CPL Validation error rate that reflects data inconsistencies during closing,” he said. “Mortgage and real estate lenders are increasingly tackling cybersecurity threats and are now focusing on managing third- and fourth-party relationships involving large or frequent transactions of sensitive data or funds.”
Decision-ready data built from trusted sources will continue to be a hallmark in the mortgage and real estate finance industry, the report said. AI solutions offer significant potential for automation, collaboration, and process improvement, leading to better customer experiences and pricing. “However, these benefits rely on accurate data sets and real-time data verification using live repositories, which are crucial for responsible and efficient AI initiatives.”
This is coupled by the fact that threat actors were able to hit sizeable entities and organizations in direct and targeted attacks during the quarter. At AT&T, a breach affected over 51 million customers, exposing Social Security numbers, account details, addresses, dates of birth, emails, passwords, and phone numbers. And at the U.S. Treasury Department, Chinese state-sponsored hackers exploited vulnerabilities in a third-party cloud security provider, gaining unauthorized access to unclassified documents and workstations.
