Because they're doing due diligence. The level of verification of information is commensurate with the amount of money at stake.
If you're about to give someone hundreds of thousands of dollars, you're going to find out everything about them, some information about the vendor, info about the asset that is going to be your security any risk factors etc.
While the money is the important aspect of the transaction, risk is informed by many factors. A disparity between the prior valuation (i.e. there was a house and now there isn't) is pretty significant information. discrepancies have to be resolved and understood to make a proper assessment of the risk. It could be nothing, but you don't know that without making teh enquiries. The why is relevant.
SO a standard question that would come up during BAU would be around how much of the settlement proceeds are due to the original lender, have they received the insurance pay out, how much money goes to the vendor etc. They're not just going to take the vendors word for it, they're going to call the party that holds the security and where the debt is owed. That's the first thing that will happen and that's when the first lender will be like "what you talkin' about,Willis?" or "yes, this client had a catastrophic fire on the property and the amount due to us is x".
In the first example there is a huge red flag and complicates things for EVERYONE. Banks are just not interested in dealing with all the peripheral stuff that comes from that. It might be a lot of money to a consumer, but a bank missing out on doing a singular potentially high risk deal is of no consequence. Its often simpler to not even investigate fully, decline the deal and list a "possible" fr@ud flag and leave it up to the next lender to work it out when they do their due diligence.
The average lifecycle of a mortgage is around 2-4 years. Not a enough money gets made by a bank in this time in the scheme of things to really care about one deal with many question marks.
Once a question of fr@ud or potential fr@ud comes into it, they are obligated to report it into the Equifax fr@ud focus group shared fr@ud database. That report flags to anyone who has an active account with that client (based on the accounts listed in a credit file). this is also a mechanism in which the old lender will get an alert and may call the new lender and discuss why they added the alert if they haven't spoken already.
Trusting that the mortgage is going to be covered requires that you trust there is no issue with the vendor, the borrower and the asset, not just if the financials stack up.
Yeah. on every single one of them. Just depends which departments are chatting - the settlements teams exchanging information on costs and disbursements, the underwriters externally verifying the asset information and credit worthiness of a client, or the fr@ud teams investigating non standard issues with a deal. So many people between the lenders are touching the deals that if something sticks out, you can guarantee it will be raised and looked into. Fr@ud teams often look over thousands of files that dont even have any fr@ud on them because certain features are unusual. The new lenders proposed security is at stake.
first up - when you apply for ANY credit you sign a consent to disclosure of your personal information in relation to that deal. That includes an ongoing disclosure in relation to that deal. We call this teh privacy waiver, because that's whats happening. You probably think thats just so they can access your credit file, but you should take a closer look at the wording .
There's a few rules that need to be followed in such discussions to stay in front of the APPs and regulations when sharing this information, but as soon as two fr@ud department lackeys are discussing a clients potential fr@ud, the conversation will flow very freely. Fr@ud department calls are often not recorded because they aren't customer facing.
Secondly compliance training provided to businesses is usually too broad in coverage and doesn't discuss nuances of the laws the training is covering that specialised departments use to complete their tasks.
except its not backroom, the mechanisms are well established inside the lenders and inside the worlds largest credit intelligence company (equifax) which every lender has an account with AND the client has consented to the disclosure when they signed one one of the many papers through the mortgage process.
My friend, this is the real world equivalent of not reading the EULA when you click "i agree" to facebook's (or any other services) terms. This isn't some random tellers gossiping sensitive client information with friends from other institutions while they are out at lunch.
this isn't commercially sensitive information, the whole competitor aspect has no bearing on these conversations. The lifecycle of an average mortgages is 2-4 years before it gets refinanced. Losing a customer is irrelevant. Take a look at the size of an average mortgage book and how it fluctuates.
This isn't an insurance claim. Its credit due diligence. Insurance claim investigation is small fry. Claims occur on a small percentage of policies, and the mechanisms are commensurate with those activities. insurance claim investigations occur when a claim is made which is when a fr@ud can occur, because that's when an insurer is paying out money. They'll accept anyone upfront.
For mortgages the transaction is the opposite, and the money is going out the door at the start of the transaction on ALL mortgages. The fr@ud and credit risks can materialise immediately compared to where they do in insurance. Not only are you comparing apples and oranges, dollar for dollar, you're not even the in the same ball park.
A body you're referring for insurance exists in this situation too except at a much more detailed level and, again, the key here is the client has specifically provided consent to a very broad disclosure between the parties that use this body and its services.
I hope this has been educational for you. Probably much more so than your compliance training.
you seem to be backpedalling very fast. what you're describing now is more in line with the current fin industry standards compared to your earlier claims
They use a number of ways to skirt around the conversations to stay in the grey area in relation to privacy laws. But rest assured, the original bank has a high likelihood of identifying what's occurred. If there is enough obfuscation of the issue or they feel they're beeing mislead, they will flag fr@ud/potential fr@ud on the client and there will be zero chance of the client getting any support, let alone any future credit for the foreseeable future. That fr@ud flag is tied to credit profile of the client but not visible on their retail/consumer version of the credit file.