Verifying Borrower Identity

Written By: Frankie Lacy, Op-Ed Writer

There are many reasons each borrower’s identity must be verified. First, lenders must verify data integrity on the loan application, disclosures, credit, and automated underwriting findings. Beyond this initial process, lenders must verify borrower identity to prevent the following:

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1. Identity theft
2. Fraud for profit or property
3. Violation of the Patriot Act
4. Transactions with parties on Office of Foreign Assets Control (OFAC) exclusionary list
5. Transactions with parties on HUD’s Limited Denials of Participation (LDP), System for Awards Management (SAM), or lender exclusionary lists
6. Transactions with borrowers that are illegal residents of the U.S.

Borrower verification documentation should consist of the following:

1. Government issued identification such as a driver’s license or passport
2. Government issued citizenship documentation such as a permanent resident alien card or work visa
3. Social Security verification through an approved third party vendor service such as DataVerify

In addition, loan documentation within the file can be used to support the borrower’s identity. For example; a social security number can be compared with the number listed on the borrower’s tax returns or W2’s. The correct spelling of the borrower’s name can be checked against bank statements, income documentation, insurance documents, and divorce decrees. Underwriters and processors should be checking borrower names, dates of birth, social security numbers, and addresses against any documentation that is submitted with the loan file. A conscientious focus on this area can protect consumers and lenders from costly fraud schemes.

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Identification documents must be clearly legible at all times. If the photos or lettering are grainy or smudged, the lender must condition for a legible copy. In addition, lenders must condition for address discrepancy clarification. Fraudsters often use stolen names and social security numbers with alternate addresses. This prevents identity theft victims from receiving any of the loan documentation in the mail. Any identity documentation that appears to be altered must be questioned and escalated to the appropriate fraud prevention team member.

About The Author

Frankie Lacy - As an op-ed writer, Ms. Frankie Lacy is a 15+ year mortgage industry veteran with extensive conventional mortgage underwriting experience. Topics of Frankie's expertise include: Fannie Mae, Freddie Mac, USDA Rural Housing, underwriting to investor overlays, self-employed borrowers, personal and business tax return analysis, rental income, condos/co-ops/PUDs, and more. Frankie is a Davenport University graduate with a degree in Business Administration.

Opinion-Editorial (Op-Ed) Disclaimer For NAMU® Library Articles: The views and opinions expressed in the NAMU® Library articles are those of the authors and do not necessarily reflect any official NAMU® policy or position. Examples of analysis performed within this article are only examples. They should not be utilized in real-world application as they are based only on very limited and dated open source information. Assumptions made within the analysis are not reflective of the position of NAMU®. Nothing contained in this articles should be considered legal advice.