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Minding – and Mining – the Details Can Reduce Loan Risk

August 02, 2023  //  BY Paul W. Harris

Sir Isaac Newton is famously quoted for saying: for every action, there is an equal and opposite reaction. He wasn’t talking about the mortgage industry, of course, but his theory can be applied to the ups and downs of the market. Every market cycle brings new opportunities and with them the potential for risk. Minding – and mining – important details is critical in mitigating risk, maintaining compliance, and improving underwriting. This is the first of a three-part series that will delve into important risk factors that lenders face, especially in this current lending market. In this blog we will cover military status verification: what it is and how our FraudGuard® solution helps lenders comply with the current legal landscape.

Recently, the Consumer Financial Protection Bureau (CFPB) signaled that it intends to closely monitor lenders to ensure military personnel and veterans receive their full benefits under the Servicemembers Civil Relief Act (SCRA). Last December, for example, the CFPB released research showing that Reserve and National Guard members who were called to active duty paid millions in extra interest because they did not receive rate reductions under the SCRA.

At that time, the CFPB noted that it had already brought 39 enforcement actions against lenders and other financial companies that had resulted in $175 million in relief for servicemembers.

To help clients comply with SCRA, First American Data & Analytics enhanced its industry-leading FraudGuard® fraud risk detection and decisioning tool to include a military status verification component that confirms whether an applicant is considered active, retired, or a survivor of military personnel and, therefore, entitled to SCRA benefits. The SCRA gives active duty servicemembers the right to request interest rate reductions on outstanding loans during the time they are activated and, in the case of mortgages, for an additional year after their active duty. The CFPB estimates that a mortgage loan with an interest rate between 6.5% and 7.5% could accumulate savings of between $1,890 and $5,670 per activation. That’s significant.

Further, the military status verification module is also available as a standalone API for credit unions and/or banks to utilize in verifying active military status for customers opening checking or savings accounts and other financial products such as credit cards, lines of credit, etc.

With the increased scrutiny that likely will continue now that the CFPB has identified the problem, lenders must ensure accurate verification of military status to correctly originate a first mortgage or home equity loan. Missing the step to mine for this important detail not only increases risk, but also decreases a lender’s ability to stay compliant.

Our customers can rest easy knowing that this module is available in FraudGuard or as a standalone API and can reach out to their First American Data & Analytics representative to get it activated.


If you’re not a current FraudGuard customer and would like to learn about this module and our FraudGuard solution, connect with us to get a demo scheduled.







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