Processing loan application is a tedious task, let alone disbursing funds for a loan application, only to find out that the person applying for the loan is a fraud. Technology has become a tool for fraudsters to commit crimes, which is a problem for most lenders.
Mortgage fraud is the misstatement or misrepresentation of a borrower, investor, or a lender. Housing or mortgage fraud is committed by individuals or a group of investors who defraud via property rental or appraisal fraud when flipping homes. This has implications for real estate companies and financial institutions.
Fraud has been easily done by people through technology, manipulating information to be able to get the funding for a mortgage. Lenders and financial institutions need to shield themselves from fraud and save reputation. Thus, these institutions invest in verification tools to prevent fraud.
Online tools such as 4506-T verification retrieve a copy of a client’s tax return of at least four years. Third parties, including mortgage lenders, verify a borrower’s income with the IRS. This prevents mortgage fraud and saves the real estate industry and economy.
What lenders look for
If a person decides that they need to get a mortgage, they are most likely to have background checks from their lender, such as an application for the 4506-T. Once this has been processed, lenders can review your tax returns as it is part of most loan applications.
Lenders evaluate an individual’s tax return based on the type of loan that they are applying for. Short-term loans can have repayment of 18 months period. The lender will make sure that the borrower has enough revenue to cover for daily or weekly pay, depending on the agreement.
As background check, some lenders may verify an individual’s employment status by calling their employer. But this is dependent on the factor as employee status. Folks with regular jobs won’t have to sign 4506-T. Some lenders just send verification of employment (VOE) form to their employer.
Self-employed borrowers have to show as evidence that year of a successful business or sufficient income to get their mortgages approved. Mortgage lenders need to validate that an individual’s income trends higher and not lower to get approval.
Lender fraud prevention
As part of a pre-qualification for a mortgage application, lenders can provide to have copies of tax return digitally. Some lenders have personal guidelines for borrowers to follow. For easy approval, borrowers need to follow the specified guidelines set by lenders.
Digital verification of the Form 4506-T is quicker than getting hard copies and have them sent to the lender. It usually takes financial institutions and individuals to get copies of the form in as little as three days, whereas it takes 90 days if it is processed manually.
Financial institutions or lenders choose to have tools to protect them and their clients from possible fraud. Fraud prevention tools are available for businesses, banks, lenders, and lawyers – it gives them easier access to tax transcripts of clients quickly, which in turn saves them time and money.