Even with all the latest tech, executive says veteran brokers should trust their gut when it comes to fraud
Mortgage fraud has been one of the biggest focuses of the Federal Housing Finance Agency since Bill Pulte took over the department.
The theme continued on Monday night, when President Donald Trump announced on Truth Social that he was firing Federal Reserve governor Lisa Cook in part due to mortgage fraud allegations.
Michael Waldron (pictured top), founding partner of Gate House Compliance, LLC, said he is glad to see the spotlight placed on fraud, even if he doesn’t think it’s been ignored before this renewed push.
“I think it's a worthy endeavor to put more light on mortgage fraud,” Waldron told Mortgage Professional America. “I think it is a refocusing on something by an administration that has long been focused on, so I don't think it's been ignored in the way that some folks want to characterize.”
While he doesn’t think it was a bolt of lightning out of the blue to focus on fraud, brokers need to make sure they are paying close attention to fraud, especially with new technologies making it easier to detect.
“I don't think that someone had an epiphany that is now all of a sudden valid where you know previously, no one thought of it,” Waldron said. “I don't believe that, but it is still a worthy area to call attention to.”
Fraud more sophisticated
The days of fraudsters sitting around with bottles of White Out changing documents aren’t entirely gone, but generally, that’s not the way fraud is conducted in 2025.
“For brokers, I would say we focus on the complexity of preventing fraud, especially now with the technology,” Waldron said. “It's not gone. Are the days when someone would white out something and cut and paste gone? I'm sure that still exists, but it's so much more sophisticated now.”
While fraud is more high-tech, the tools to catch mortgage fraud have also improved tremendously from the days of having to manually sift through mountains of paper looking for clues of altered documents or incorrect information.
Waldron said brokers should familiarize themselves with these tools. Continuing education is critical for staying ahead of those who are committing fraud.
“Educate yourself about the tools,” he said. “Educate yourself about the trends. Continuing education among your group is critical, and I don't mean it in the formal sense of the yearly, 45-minute training session on mortgage fraud. I mean it in the way that you do monthly huddles.
“You’re educating and empowering your people with, ‘Mortgage Bankers Association is reporting that this actually is a new theme in fraud, and this is something we should all be looking for. What are we doing to address that? You know, are we seeing it?’ That's really what I mean.”
Trust your gut
Brokers can also reach out to their technology vendors to identify which technologies can help them detect fraud early in the mortgage process. Waldron cautions that even with the best tools, sometimes a broker’s intuition is still the best tool available.
“Draw upon vendors, because there's a lot of really cool and evolved tools out there,” Waldron said. “And the truth is, even with the best of them, it's still difficult to combat. And trust your gut. It's the old smell test. Let's not let innovation take away common sense.”
With new technologies, brokers and lenders can now go through their entire pipeline to ensure compliance is met and fraud is detected. However, Waldron reminds brokers and lenders that now that you have that data, you will be expected to act on what you find.
“One of them is taking your quality process and building it in so that you're not simply doing a 10% sampling anymore, or a couple percent sampling on, for example, call monitoring,” he said. “You now are empowered to do 100% of your pipeline or your portfolio, and that's incredibly powerful.
“But my point is, be careful what you ask for, because if you are empowered with the results, you are obligated to do something with them. It is shining light into new areas of opportunity, and those areas are going to have to be staffed.”
With CFPB downsizing, states are ramping up oversight. Daniella Casseres of Mitchell Sandler told brokers at NAMMBA Connect to prepare for more investigations and stricter compliance rules.
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This is one area where Waldron believes AI and technology could actually increase jobs instead of taking them away. While AI might speed up the process of checking for fraud, it will also produce considerably more data that people will need to review and process manually.
“Part of that process is taking that and, in those areas, applying automation to do the improvement, but you need human intervention there,” Waldron said. “You need experience to know, ‘Is this a false positive? Is this an area that we prioritize, and how do we address this? Is there a remediation that is warranted? Is it still what we used to call the old one-off?’ Not everything that you shine a light on is necessarily worthy of a full-blown remediation.
“But you’re able to streamline and create efficiencies, and you're able to use human capital in areas that are more worthy. You are now capable of finding those opportunities at a faster pace.”
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