Beyond the Guide: Striking Out Mortgage Fraud
Well, the Cardinals lost today (05/03/26 - Dodgers 4-1 Cardinals (May 3, 2026) Game Recap - ESPN - Boo!) but your humble correspondent shall persevere.
Baseball season is in full swing around the country and the “boys of summer” (Don Henley - The Boys Of Summer) are back. With the season comes higher production for mortgage lenders. But, with higher production comes a risk – mortgage fraud. In the high-stakes game of lending, mortgage fraud is the ultimate "curveball" that can wreck a season. It remains a persistent threat that leads to significant financial loss and regulatory "ejection" if not managed correctly. For lenders, the ability to scout these risks before they cross home plate is paramount.
The Commonwealth Group (www.thecommonwealth.net) is your “MVP” as they specialize in helping lenders strike out fraud through rigorous quality control (QC) and compliance services designed to keep your roster clean and your portfolio safe.
Scouting the Opposition: The Rising Tide of Fraud
Even the best pitchers give up hits, but mortgage fraud trends suggest the "opposing team" is getting more aggressive. Recent industry data shows that as of the second quarter of 2025, the national mortgage application fraud risk index increased by 6.1% year-over-year. Approximately 1 in 116 mortgage applications now contain indications of fraud—a stat that would make any manager nervous.
According to the latest "scouting reports" from Fannie Mae and Freddie Mac, several specific types of fraud are trying to steal bases on your watch:
Undisclosed Liabilities: Cited by Fannie Mae as a top defect in 2025. These are the "hidden players" on a borrower’s credit report- auto loans or leases that are not disclosed, which can cause a DTI "strikeout" during post-closing reviews.
Income Misrepresentation: This is the most common "error" in the field, accounting for 46% of Fannie Mae investigations. Income and employment defects spiked 42.5% recently, requiring a more eagle-eyed umpire at the underwriting desk.
Occupancy Fraud: When an investor tries to "pinch-hit" as a primary resident to get better rates, it is a major foul. Occupancy issues accounted for 29% of findings for 2024 vintage loans.
Transaction & Property Fraud: Transaction fraud risk rose by 6.2%, while Freddie Mac reports that collateral and property condition defects now represent 23% of all defects on repurchased loans.
Covering All the Bases with The Commonwealth Group
The Commonwealth Group provides a "Gold Glove" suite of Quality Control and Compliance services. By leveraging 100% onshore, expert-led reviews, they act as your team’s bench coach, identifying long-term trends and immediate red flags before they cost you the game.
Their Championship Defense Includes:
Independent QC Testing: Think of this as the "Instant Replay" booth. They verify that your underwriting department and your closing agents are making the right calls to prevent systemic errors.
Document Reverification: The very best of processes does not eliminate the risk of fraudulent documentation. Our team helps mitigate this risk through our reverification services. Think of them as your ABS system (MLB to use ABS Challenge System starting in 2026)
Forensic Underwriting: When things do go wrong, you can depend on the professionals at The Commonwealth Group to provide the “scouting reports” your legal teams need for a full investigation and write the reports your they will need for both civil and criminal actions.
Warehouse Due Diligence: For warehouse lenders, the accuracy of credit and collateral is the "bullpen" that protects your capital. Specialized audits mitigate the risk of warehouse line fraud.
Regulatory Compliance & Internal Audits: The Commonwealth Group will stress-test your Compliance Management System (CMS) against AML/BSA, HMDA, and Fair Lending rules to ensure you do not get a "balk" from regulators.
Contract Underwriting & Processing: Expert contract services ensure every loan is reviewed with high-standard integrity, catching miscalculated rental income or missing documents before they reach the "eighth inning."
The "Day 1 Certainty" Home Run
Fannie Mae reports that when lenders validate the core components of Day 1 Certainty®—income, employment, and assets—the risk of a loan "repurchase" (the ultimate loss in the standings) is significantly reduced. The Commonwealth Group helps you achieve this by identifying top defects early in the lineup.
Contact Martin Luplow at The Commonwealth Group – info@thecommonwealth.net for more information on what our team of professionals can do for your company.
The Commonwealth Group – Innovative Services for the Mortgage Industry
West Beibers, CMB, AMP, CRU
Chief Executive Officer
The Commonwealth Group Companies