As fewer people are looking at mortgage loans due to AI, why that might allow fraud to grow
New technology is not only surging in the mortgage origination space, but also in the mortgage fraud space.
Fraudsters are using AI technology to create mortgage fraud far more sophisticated than the early days of hand-forged documents. To keep up with fraudsters, mortgage companies have invested in technology.
Even the federal government has turned to tech companies to combat fraud, when Fannie Mae announced it was partnering with Palantir to investigate mortgage fraud.
However, as mortgage loans become more automated, one industry expert worries that this could actually be opening the door to more fraud, not less.
Matt Seguin (pictured top), senior principal, fraud solutions at Cotality, is concerned that fewer people looking at loans could lead to some warning signs being missed.
“Our belief is still that, having that underwriter common sense check is still a really important piece of the puzzle,” Seguin told Mortgage Professional America. “Is technology going to recognize the oddity of someone who, last year, was an Uber driver making $25,000, and now they're a manager making $300,000. Eventually, that technology will be there. But is it now?”
Recognizing patterns
Seguin is concerned that something that would be an easy catch for a veteran mortgage professional might slip through a computerized fraud check.
“Is it going to recognize something that just doesn't make common sense?” Seguin said. “The fraudsters always seem to be a step or two ahead. As that technology comes out, fewer people are looking at the loans, especially at a summary of the transaction.
“You’re going to have a group of people just look at this, and then look at x and y and z, and no one's going to ever put it all together. Some stuff's going to sneak through, and we're going to have to make sure that there is human intervention somewhere in there.”
For brokers who are still in a position to review loans before they are finalized, one area where Seguin believes people can spot fraud is the pattern loan.
“My advice would be to really just look for patterns that don't make sense,” he said. “A lot of brokers have referral sources, whether they're realtors or something else. You might notice that there's a vast majority of those referral sources. Where they’re all self-employed borrowers, or they all come in from the same tax preparer. Things that might seem too good to be true that fit in a pattern. I think that's where you get really, really burned big time.”
Of course, Seguin notes that if a tax preparer is one of your referral sources, that wouldn’t be a pattern you could use. But even then, if a group of borrowers from the same tax preparer always seems to earn the right amount of money to qualify, that might be a red flag.
“Analyze those lead sources to figure out what the commonalities are,” Seguin said. “If your lead source is a tax preparer, okay, it makes sense that they're all going to be from that tax preparer. But if not, then maybe it doesn't make sense. If all the borrowers come from this one tax preparer, and they all make the perfect amount of income to qualify, that just seems too good to be true. That’s when that antenna should go up for you.”
Looking ahead to 2026
Seguin thinks the pattern loan will be the big story in 2026, as it was in 2025. The major fraud issue in Baltimore was one he cited as an example of a case that aligns with what they’re seeing in their surveys.
“I think it goes back to a year of that pattern loan,” he said. “I think that's going to be the big thing in fraud. Also, looking for the schemes. That article in Baltimore really supports our numbers. It's investment properties. Those investors were out in New York State, number one on our list. It fit it to a T, and it's common appraisers and common title agents.”
United Wholesale Mortgage is going after a Florida mortgage broker for what it calls a pattern of fraud that left the lender holding over $309,000 in losses. https://t.co/DKsoeSb6cA
— Mortgage Professional America Magazine (@MPAMagazineUS) November 20, 2025
While a lender or a broker can get burned by an occasional fraud situation, what hurts even more is when it is a batch of fraud. That can cause people caught up in the scam to potentially lose their business. Those are the types of fraud that Seguin urges brokers to be vigilant for.
“From a vendor perspective, it's easier to just work with a couple of people, but it provides a lot of risk from that pattern,” Seguin said. “I think that's where one case of occupancy fraud or income fraud is not good. But where you really get burned is that batch of 5, 10, or 15 of them. That can hurt a lot and can put somebody out of business. My prediction is that, as the GSEs really start focusing on it and with technology, I think that's where it's going to go.”
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