Tustin, CA (PRWEB) October 25, 2010
New regulations pending as a result of the recently enacted Dodd-Frank Financial Reform Act have sparked a mad dash among mortgage lenders to income, employment and asset verification products. But too much weight spent on the cheapest and fastest solutions without concern for data security could land lenders in hot water and place their customer’s privacy at risk, said Michael Chon, co-president of leading income verification and fraud prevention services provider Veri-tax, LLC.
“Pricing is important, but right now it’s the only thing many of our competitors both large and small are focused on—not security and compliance,” said Chon. “Next year I believe we’ll be seeing bodies washing up on shore, because other companies in this sub-industry are ignoring the most basic security protocols and placing the integrity of lenders at risk. For instance, some of our competitors are actually emailing tax transcripts to their customers, which is a major compliance no-no and a huge security risk.”
Passed by Congress and signed into law this past July, the Dodd–Frank Wall Street Reform and Consumer Protection Act establishes sweeping changes in the financial services industry, including new national underwriting standards for mortgage loans. Specifically, Section 1411 of the Act not only requires income verifications on all mortgage applications, but it also requires that they be conducted by a third party. Previously, there was no federal requirement to verify a borrower’s income, leading to the rise of no-doc and low-doc loans that industry observers cited as a root cause for the recent mortgage crisis.
Chon pointed to the current “foreclosure-gate” scandal as a perfect example of the crisis brewing among mortgage originators. To deal with record numbers of foreclosures, some financial institutions and mortgage servicers allegedly hired workers with no previous mortgage experience to sign foreclosure affidavits without properly reviewing them. In the wake of the so-called “robo-signing” scandal, several lenders have since halted foreclosure filings and placed their internal processes under review.
“The current foreclosure mess is proof that fallout from the mortgage meltdown is far from over, and is an important lesson for what is currently happening on the origination side of the business,” Chon said. “When it comes to verifying loan applicants, it’s not enough to simply have procedures in place – they need to be the right procedures. As we’ve seen time and time again in our industry, cutting corners is short sighted and causes more harm than good in the long term.”
A pioneer in the field of electronic income and identity verification solutions, Veri-tax enables mortgage lenders, banks, and other issuers of consumer credit to make informed decisions about the ability for potential borrowers to repay loans. The company’s clients include two of the nation’s top four banks in addition to hundreds of regional banks, lenders, originators and other financial institutions serving the mortgage and consumer credit sector. Veri-tax has a 12-year working relationship with the Internal Revenue Service and its data centers are fully SAS 70 certified.
In preparation for coming regulations to take effect as a result of Dodd-Frank Act, Veri-tax is currently developing a cutting-edge, automated quality control solution using state-of-the-art software. The results of the initiative, being launched this quarter, will not only result in the elimination of many unnecessary applicant rejections based on income and identity verification orders, but will also provide data on process errors, giving lenders true insight and intelligence on their processes. Additional solutions planned for the fourth quarter include an employment verification product, an assets/deposits verification product, and an enhancement of Veri-tax’s Mortgage Fraud Report, which culls borrower data instantly from various databases and compiles a score assessing a borrower’s risk level, similar to a credit score.
About Veri-tax LLC
Veri-tax LLC provides a full array of tax verification and fraud management solutions to the mortgage lending and consumer credit industries, helping organizations more quickly and securely process borrower income and tax documentation. Veri-tax was founded in 1998 with the goal of using advances in information technology to streamline the retrieval of IRS and SSA forms and documents needed to verify borrower loan application information, and soon became the first company to deliver IRS tax transcripts electronically to lenders nationwide. Veri-tax’s suite of high-tech fraud prevention solutions helps lenders better protect themselves including secure 4506-T Processing, TFV Reports™, SSN Verification, Veri-tax Mortgage Fraud Reports™ and Bankruptcy Verification. The company is based in Tustin, California. For more information, call 1-800-969-5100 or visit http://www.Veri-tax.com.