Written By: Stacey Sprain, Op-Ed Writer
Though all of today’s technological improvements allow lenders a better opportunity to validate loan application information for loan applicants, such advances have also increased the risk for identity theft with so much personal data moving through so many extra portals and moving through so many extra pairs of hands. Let’s think about it. We take loan applications that contain social security numbers, address information, birthdates and account information. Think of how many people have access to one individual borrower’s personal information throughout the life history of a single loan application that leads to the granting of the loan. Then think of how many additional pairs of eyes see that information when we add in all of the access granted to our third party vendors who we may use to provide tax transcripts, employment verifications, credit reports, and other verifications we use in the lending process. Add in the pairs of eyes that view and have access to that information when it starts in the hands of a mortgager broker, moves on to a correspondent lender, then moves to an end servicer and then on to an agency. I think it safe to say that it’s no surprise that the probability of identity theft is much higher now than it ever has been.
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I am blown away to read some of the FBI reports and articles that disclose some of the most recent identity theft rings that have been uncovered in recent years. Here are excerpts from two of the most recent and concerning cases-one in New Jersey and one in California:
“Lee and Ko were arrested on Sept. 16, 2010, in a coordinated law enforcement takedown of 53 individuals in connection with widespread, sophisticated identity theft and fraud, including 42 other individuals charged with participating in one large-scale criminal enterprise.”
“According to court records, in 2008 Lu gained unauthorized access to the names and personal identification information of many employees of a local San Diego business and their family members. Lu used this stolen information to open credit cards in approximately 90 victims’ names and then used those credit cards to purchase air, hotel, and show ticket packages worth approximately $249,327 from Travelocity.com.”
In addition, a report at the IRS website dated on January 31st offers the following:
“The Internal Revenue Service and the Justice Department today announced the results of a massive national sweep cracking down on suspected identity theft perpetrators as part of a stepped-up effort against refund fraud and identity theft.
Working with the Justice Department’s Tax Division and local U.S. Attorneys’ offices, the nationwide effort targeted 105 people in 23 states. The coast-to-coast effort took place over the last week and included indictments, arrests and the execution of search warrants involving the potential theft of thousands of identities and taxpayer refunds. In all, 939 criminal charges are included in the 69 indictments and information related to identity theft.”
There is no question that identity theft is the hot topic for 2012. We as lenders are challenged with the task of having systems in place to secure our applicant’s personal information and we’d best be choosy about assuring that those we work with as third party vendors have such levels of security in place as well. We need to be very aware of whom we are doing our business with and how seriously they take the risk of identity theft and what they do on a daily basis to help prevent it.
Personally identifiable information, such as a Social Security Number, is the most valuable tool an identity thief can obtain to commit financial fraud. It becomes even more valuable if it is linked to other personal data, such as income information used to prepare a tax return. As we all know, our lending environment requires all borrowers to complete and sign Form IRS 4506-T so that we as lenders can obtain transcripts from the IRS to validate each borrower’s income used for loan qualification. We also use transcripts for other purposes such as confirming marital status, confirming number of dependents claimed, validating residence history, watching for other real estate owned, watching for unreimbursed expense write offs, and watching for undisclosed self-employment among other things.
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This tax year, the IRS has been challenged to be able to assure taxpayers that it is taking every precaution possible to protect their personal information. This was due to the findings of an investigation of the IRS Income Verification Express Services Program (IVES) conducted by the Treasury Inspector General for Tax Administration which reported the following:
• More than 142 million taxpayers entrust the Internal Revenue Service (IRS) with sensitive financial and personal data, much of it on paper documents requiring protection.
• IVES Program participants obtain and collect large quantities of taxpayers’ personally identifiable information and associated tax return information that could be used to commit identity theft.
• During the last two calendar years, the IVES Program processed more than 10 million transcript requests annually.
The overall objective of this review was to evaluate regulations and IVES enrollment policies that ensure lenders, such as banks, and companies that specialize in making third-party requests for lenders (Income Verification Specialists) properly protect taxpayers’ tax return information. You can read the full report details, which I think you will find quite interesting, athttp://www.treasury.gov/tigta/auditreports/2011reports/201140014fr.html.
As a result of the reporting, the IRS is already offering an emphasis on identity theft awareness and taxpayer resources for 2012. You’ll find a new section at the irs.gov website titled “Special Identity Theft Enforcement Efforts – 2012.” Within this new site are links to the following resources which raise awareness for the topic of identity theft:
• Identity Theft Crackdown Sweeps Across the Nation; More than 200 Actions Taken In Past Week in 23 states
• Map of Criminal Investigation Activity: January 2012
• Press Releases on Enforcement Efforts Around the Country
• Criminal Investigation's Identity Theft Page
• Additional Identity Theft Outreach Materials
• Taxpayer Guide to Identity Theft
One of the most anticipated trends expected with this tax filing season is the fraudulent filing of tax returns by identity thieves who use a taxpayer’s identity in hopes of receiving the refund proceeds. Most taxpayers won’t even be aware this has happened until they file their legitimate return later in the tax season and discover that a return was already filed under their social security number. Many will learn when they receive notification from the IRS in the form of a notice or letter that the IRS advises be immediately responded to.
The IRS advises of the following actions that should be taken by taxpayers who need to report theft of their identity:
1. Taxpayer must complete IRS Form 14039- Identity Theft Affidavit which is available for download at http://www.irs.gov/pub/irs-pdf/f14039.pdf.
If the taxpayer received a notice from the IRS, they need to return the completed form along with a copy of the notice to the address contained in the notice.
If the taxpayer receives a notice from the IRS with a fax number shown, the taxpayer must complete and submit Form 14039 with a copy of the IRS notice to the fax number given in the IRS notice.
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If the taxpayer did not receive a notice from the IRS but wishes to self report theft of their identity to the IRS, they must complete and either mail the completed form to: Internal Revenue Service P.O. Box 9039 Andover, MA 01810-0939 or fax the completed Form 14039 to (978) 684-4542.
2. Victims of identity theft who have previously been in contact with the IRS and who have not achieved a resolution should contact the IRS Identity Protection Specialized Unit, toll-free, at 1-800-908-4490.
3. Taxpayers whose tax records are not currently affected by identity theft, but may be at risk due to a lost/stolen purse or wallet, questionable credit card activity or credit report, etc., should contact the IRS Identity Protection Specialized Unit at 1-800-908-4490.
The IRS has also updated and provides a new version of Form 4506-T which was released in January 2012. The new form provides a box that taxpayers can check to indicate whether they have notified the IRS or that the IRS has notified them to report identity theft. However, it’s not clear what affect checking the new box will have on the IRS providing transcripts to fulfill the request indicated on the transcript order request.
About The Author
Stacey Sprain - As an op-ed writer, Ms. Stacey Sprain is currently a NAMP® Certified Ambassador Loan Processor (NAMP®-CALP). With over 15+ years of mortgage banking experience, Stacey is also a Quality Control Manager for a major mortgage lending institution.
