Why Investigators Must Look Beyond the Documents

Mortgage fraud continues to evolve in tandem with new technologies. According to Julie Treloar, CFE, director of risk and compliance for a digital lending platform, successful investigations often come down to looking beyond what's on paper.

During her session at the 37th Annual ACFE Global Fraud Conference, Treloar walked attendees through three real mortgage fraud investigations to illustrate how seemingly legitimate loan files unraveled when investigators examined borrower behavior, relationships and financial patterns instead of relying solely on documentation. 

She opened the session by underscoring how mortgage fraud remains such a significant challenge despite advancing investigative techniques.

"Fraud doesn't disappear," Treloar said. "It adapts and gets more creative." 

Although technology has made it easier to alter documents and fabricate information, she said investigators sometimes overlook obvious warning signs. They become too focused on reviewing paperwork instead of asking whether the story behind the documents makes sense. 

When the Numbers Don't Tell the Whole Story 

The first case study involved a convenience store employee whose loan application appeared straightforward. The borrower submitted consistent pay stubs showing stable employment and sufficient income to qualify for the mortgage. Upon closer review, the borrower also owned a convenience store as a self-employed business owner. The tax returns painted a different financial picture, showing significant deductions and a much lower taxable income than the wages presented in the application.

Treloar said that the borrower most likely reported employment income because it appeared stronger and more stable than self-employment income. This increases the chances of loan approval.

The investigation uncovered additional warning signs, such as undisclosed ownership interests, inconsistencies between tax returns, and unusual income documentation and deposit activity. The loan was ultimately denied for misrepresentation.

This case example connected to one of Treloar's key messages: income should never be evaluated as a standalone number.

"Income isn't just a number," she said. "It has to tell a consistent story." 

Trusting Instincts Can Stop Fraud 

The second case Treloar presented demonstrated that fraud isn’t always uncovered through documents alone.

A fraudster assumed the identity of a homeowner who owned a property free and clear, then attempted to obtain a cash-out refinance to extract the home's equity through a wire transfer. On paper, the application appeared legitimate. The personal information matched public records, the property ownership was valid, and the borrower's credit profile appeared clean. 

However, several small inconsistencies caught the notary’s attention. The applicant's employment information was inconsistent, there were discrepancies involving occupancy information and even the signature contained errors, including a misspelled name. 

The notary documented the encounter in detail, kept the documents and reported concerns immediately. Funding stopped before the wire transfer could be completed, preventing what Treloar said would likely have been an irreversible financial loss. 

"Give your staff permission to trust their instinct," Treloar said, "and give them a clear, fast path to report things if they look wrong." 

Looking for Patterns Instead of Isolated Cases 

Treloar's third and final case illustrated how a single suspicious loan file can uncover a much larger fraud network.

The borrower claimed to be a logistics coordinator earning a six-figure salary at a trucking company. The employment verification confirmed the position and the reported income, and deposits into the borrower's bank account appeared to support the application. 

Inconsistencies began to emerge when investigators looked more closely. The trucking company had only one truck despite reporting multiple highly paid employees. The borrower had also recently transitioned from working as a rideshare driver with a much lower income, raising questions about the sudden jump in earnings. 

Investigators noticed that the same real estate agent and tax preparer appeared across multiple loan files with similar characteristics. The company owners had previously been borrowers themselves and were hiring new applicants whose files followed nearly identical patterns. "This was not one borrower," Treloar said. "This was a system."  

Cross-checking multiple files exposed a coordinated fraud network and prevented additional fraudulent loans from being funded.

"If you find one file," she added, "you probably haven't found the whole story." 

Looking Beyond the Paper Trail 

As the session concluded, Treloar encouraged attendees to rethink how they evaluate mortgage applications.

Across all three cases, the documents appeared legitimate. Inconsistencies in behavior and relationships ultimately exposed the fraud. 

• She left attendees with three questions to ask themselves during future investigations: Does the story make sense?  

• Does the behavior match the documentation?  

• Does the pattern repeat elsewhere? 

Treloar also shared several practical tips: 

• Review bank statements carefully. 

• Examine metadata embedded in PDF documents. 

• Compare identification documents side by side to help identify synthetic identities.  

She acknowledged that artificial intelligence is making document fraud more convincing, but that it also makes critical thinking more important than ever.

"Fraud evolved," Treloar said, "so should we."