Fraud - Interthinx Index Patent & Current Mortgage Loan

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1 None of the results contained herein reflect either civil or criminal cases of fraud proven in a court of law. The results are comprised from data provided by Interthinx clients, internal and external Interthinx data sources, Interthinx product scoring results, and human decision making logic. The results reflect a significant variance between borrower provided data and the other data sources generally set forth above, and are indicative of a greater potential for misrepresentation. Copyright 25 Interthinx All rights reserved. Current Fraud Risk: Back Where We Started? Ann Fulmer May 4, 212 Proven risk intelligence for lenders and investors Definition of Mortgage Fraud Bank robbery without a gun: Misrepresentation or omission of material facts Object is to obtain Loan proceeds Physical and legal control of property A loan Better loan terms by misrepresenting Debt relief Compare to predatory lending: Sophisticated lenders/brokers taking advantage of unsophisticated consumers for lenders financial advantage Scope of Mortgage Fraud Less than $1 billion in 27 per FBI Interthinx forensic analysis of random sample of originations: 13% of total originations = $1 trillion 16% of fraudulent loans ended in foreclosure Direct losses to lenders = $112 billion $8,,,, in lost equity Costs less than $15 per loan to prevent Q4 211 MSA Level Current Originations Current Foreclosure Densities Fraud Risk and Housing Distress FORECLOSURE RANK/RATE 1 NV 6.25% 2 AZ 4.14% 3 CA 3.19% 4 GA 2.71% 5 UT 2.32% 6 MI 2.21% 7 FL 2.6% 8 IL 1.95% 9 CO 1.78% 1 ID 1.77% Realtytrac The Past is Prologue Interthinx Top 1 States for Possible Misrepresentation (based on % of total submissions) / 25 Arizona Nevada Arizona Tennessee Maryland Florida Michigan New Jersey Maryland New Jersey Florida Michigan Florida California New York Ohio Connecticut New Jersey California New York Ohio Washington Ohio Connecticut Maryland Michigan South Carolina North Carolina Virginia Tennessee Current Fraud Risk by State n = Property Q2 24 Type Specific Risk Peaks Occupancy Q4 26 Income/Employment Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q 2 Property valuation fraud risk preceded other types Occupa ncy Fraud Ri s k Index Employment / I ncome Fra ud Ris k Index Property Va lua ti on Fra ud Ri sk I ndex

2 Fraud Drove Foreclosures Interthinx Mortgage Fraud Risk Index Across Florida Counties, Fraud Drove Foreclosures Foreclosure Rates for Florida Counties, 26 (RealtyTrac) Fraud Drove Foreclosure Foreclosure Rates for Florida Counties, 27 (RealtyTrac) Miami Foreclosures Today

3 211. All Rights Reserved. 212 Interthinx All Rights is areserved. registeredinterthinx trademark is of a trademark Verisk Analytics. of Verisk Analytics, Inc. Recent sales 212 Trulia.com Current foreclosure listings Property Value? Pick a Number Zillow Trulia.com

4 Back Where We Started Repairs? Renovations? Looks Can Be Deceiving From CraigsList 2/7/12: Great property in great part of town. Property Type: Single Family House Asking Price:$19,2 Est. Repairs: $8, Est. Repaired Value: $29, Est. Profit Potential: $1,8 Looks Can Be Deceiving Snag-it of Google Maps Street View 3/2/212 Short Sale Scheme Tools Current Fraud Risk and Trends Available on the web: Aged shelf corporations Fake proof of funds Transactional dough for a day funding Asset rentals/piggy-backed deposit accounts Piggy-backed credit lines Double escrow, simultaneous, back-to-back and reverse closings Novelty documents HUD-1 forms Site visit 3/2/212 Piggy-backed Deposit Accounts How to Evade Controls The New Gurus Short Sale Schemes and Tools Flopping to depress the price Token exposure to market Inaccurate characteristics in MLS Listed in wrong market Restricted office only listing Flash listing No lock box; lockbox but no key Other offers are withheld Reverse staging Cosmetic damages Influencing the BPO Watch this movie House Wars: The Investor Strikes Back! Bad/inappropriate comparables Bribes

5 Short Sale Schemes and Tools Land trust Trustee is the orchestrator Buddy bailouts Friend or family member Property sold or lease/purchased to defaulter Undisclosed end buyers Pre-arranged sale at/near actual FMV Casual arrangement (contract not yet executed) Limited Liability Corporations Adverse Possession/Sovereign Citizens REO Schemes and Issues Flipping Bid rigging Forged deeds Reverse, simultaneous and double escrow closings Forged payoff letters Adverse possession and squatting May be owned by distressed borrower Strategic Default Risk Reverse Mortgages Home Equity Conversion Mortgages Vulnerabilities Age and occupancy misrepresentations Mental incapacity Forged powers of attorney Manipulation of property value Falsified/inflated repairs and renovations Fake liens Misrepresentation of loan type to borrower Lump sum vs. monthly draw vs. line of credit Misappropriation of loan proceeds Other Fraud Risks and Trends Land/Title theft Forged deeds of conveyance Forged deeds of satisfaction Forged title reports and certifications Two guys + one property + 4 banks = $73 million and counting Public adjuster scheme Targets distressed borrowers Small arsons Forged bank endorsements 212All AllRights Rights Re Reserved. Interthinx isi saatrademark oftrademark Verisk Analytics, 211. served. Interthinx registered of VeriInc. sk Analyti cs. Settlement Schemes Extracting the profits at the closing table: Reverse order closings Same settlement agent Separate settlement agents Payments to unauthorized third parties Payments not reflected on HUD-1 settlement statement Payment of fake liens Payment of fake/inflated second mortgages Misappropriation of loan proceeds Existing first mortgage not paid off Reverse mortgage funds retained by agent Kickbacks Why Should We Care? Civil and criminal penalties Reputational risk Financial risk 95% of all loan originations today are federally Purchased Insured Guaranteed False Claims Ace liability Taxpayers on the hook for losses Thank you! Ann Fulmer Vice President (cell) afulmer@interthinx.com