November 30th, 2021
How to Fraud-Proof Your Private Lending Business
In the private lending industry, one has to be cautious of potential fraud. Faked signatures, identity fraud, the property not actually existing, scammers pretending to be lenders (you) in order to steal money, etc. are all things that could happen if you don’t pay close attention.
Follow these steps below to help fraud-proof your private lending business.
Do site inspections
Perform a site inspection on every property. This allows you to meet the borrower and see the premises in its current shape, and also make sure that it exists. You may also want to do your own due diligence on the property.
Make sure everything is recent
Don’t accept old appraisals from a broker, especially if it’s not addressed to your company. Everything should be up to date so you know the info included is still correct. Your own verifications and credentials are important as well. If there is a scammer who is using your name to obtain money from a borrower/potential customer, you should have a way to verify that you are legitimate, and make it easy for your borrowers to check up on you. It’s also a good practice to educate your borrowers about lender due diligence and common mortgage scams.
Double-check Power of Attorney deals
Be cautious with the Power of Attorney deals. If there is a Power of Attorney present and somebody is signing on behalf of the property owner, always be skeptical. Have your lawyers review the Power of Attorney, reach out to the lawyer who did the POA, speak to the owner of the property, and see whether they understand what is going on.
Whether you are dealing with an attorney, a broker, or a realtor, be sure to check their credentials to verify that they are up to date and still licensed. You should also do a search to see if they have faced past disciplinary action.
Make sure the signatures match
Ensure that the borrower’s signature matches all documents. Pay close attention to detail and question anything suspicious. Other suspicious things could be if one of the owners of the property doesn’t show up for signing, or is never able to speak to you, if a borrower is rushing to close a deal without the necessary paperwork or conditions being satisfied.
Dealing with fraud is a huge headache that can be easily avoided when following the right procedures and being focused on important details. Make sure you and your private lending business are protected!