Editor in Chief Sarah Wheeler sat down with Ike Suri, chairman and CEO of FundingShield, to talk about rising fraud risks, what keeps him up at night, and why AI is still far from helpful in his business of protecting clients.
Sarah Wheeler: FundingShield just released its Q1 Fraud report, which showed that nearly half of the loans processed in the first quarter showed fraud risks. These were not just mortgage loans, but were you surprised at how high the numbers were? Wire fraud risk in particular was present in 9.2% of the loans.
Ike Suri: It was the highest we’ve seen for wire fraud risk. Are we surprised? No, it’s been hovering around those high levels of risk all along.
Part and parcel of the elements that contribute towards the overall fraud risk is all the movement in the industry. There are so many different angles of what affects the market at any given time. With the environment we’re in today, you’ve got attorney states where we see a lot of this fraud happening. The attorneys have a lot of control over the transaction and you can see a lot of regulatory compliance issues being missed so we see a higher risk of concentration in those states in comparison to the non-attorney states.
This quarter there was a higher rate of risk for CPL validation errors, with 13.2% of transactions having those kinds of errors. CPL validations cover things like agents being in good standing, data accuracy between lenders and title systems, and agent registration/active status.
SW: Is it always the case that you see more risks in attorney states?
IS: Every state is different in their rules and policies when it comes to this industry. The non-attorney states are such a large universe, and often those states have adopted common practice of protecting loans against fraud as far as how policies are written and how they’re adopted. So there has been more success there.
When it comes to the attorney states, each attorney one is different from each other and it gets down to the specialists in those states. How good of a job are they doing in regards to volume that’s going through them? How well are they equipped to handle resources? How committed are they to staying compliant? You would imagine they are, but unfortunately, we’re finding these errors and the issues that lead to fraud or risk not being managed.
SW: The report calls out wire fraud specifically. What’s the latest here?
IS: We saw wire fraud risks in 9.2% of the loans — that’s a pretty large spike. Of course, one loss to wire fraud is too many. We can’t tolerate even one loss in this industry because it’s someone’s life savings. And that kind of fraud can actually throw off a small IMB or a mid-size IMB because the amount is not small by the time you’re done with penalties,