Risky Products Add to Foreclosure Workload: There are too many product options out there.(Conference news)

LAS VEGAS -- There are rising delinquencies, some of which are caused by the economy but others by issues with products, such as with stated-income loans where the income was overstated, said a participant in a panel on managing third parties in the transaction at the SourceMedia Mortgage Fraud Conference here.

Marta McCall, senior vice president, risk management for American Mortgage Network (now part of Wachovia), added there is more competition in the origination business, with some originators not understanding the complexity of the new products on the market. This affects delinquency rates and risk.

There are too many product options out there and to expect third-party originators to understand them all is getting more difficult.

However, Larry Ruder, director, fraud risk management for Wells Fargo Mortgage, noted for the exotic products, if Wall Street did not buy them, originators could not make them.

Because of the shift to third-party originators doing the bulk of applications, lenders have less direct communication with the borrower, Ms. McCall pointed out. Another risk is technology because it gives people the ability to manipulate documents. There are also reports that organized crime is getting involved in mortgage fraud schemes.

To address some of the risks, lenders need to have a strong approval process for brokers and correspondents, she said. As part of this, lenders should measure the level of experience the TPO has and how long the shop has ...