ComputerWorld reports:

“Federal authorities say they have taken another step toward busting a multinational identity theft ring that is alleged to have used stolen personal data to withdraw millions of dollars from home equity line-of-credit accounts at dozens of financial institutions in the U.S., including some of the country’s largest banks.

Four individuals were arrested last week in connection with the alleged scheme, which has resulted in more than $2.5 million being stolen from the affected financial institutions, according to law enforcement officials. Another $4 million worth of attempted withdrawals by the gang were unsuccessful, the U.S. attorney’s office in New Jersey said in announcing the arrests last Wednesday.”

If the defendants are found guilty, they could face up to fifty years in prison and over a million dollars in fines.

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Feds Crack HELOC Fraud Ring

Home Equity Line Thieves

Dark Reading reports:

“Federal agencies said Monday they have arrested three members of an identity theft ring that has stolen more than $2.5 million by fraudulently accessing home equity lines of credit…

HELOCs are an attractive target for criminals, because many individuals sign up for such lines of credit as a hedge against emergencies and don’t ever use them, Liebermann observes. Many HELOCs involve large amounts of credit, because banks and financial insititutions generally offer lower rates on higher amounts of credit, he notes. If a customer has not used a HELOC, most banks do not send out a statement. And if a criminal can successfully break into an account and change the address to which statements are sent, that customer could go for many months without being aware that any activity is taking place.”

Yet another reminder to constantly monitor your home equity account and check your credit regularly, even if you don’t have a HELOC.

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Home Equity Line Thieves

New Program Detects HELOC Application Fraud

Home Equity Lines Targeted

CNBC reports:

“The FBI says HELOC thieves typically use stolen identification to apply online for a line of credit in your name. Then they instruct the bank to wire the funds to their accounts, providing their own contact information in place of yours. That way, the bank unwittingly contacts the thief to verify the electronic funds transfer.

Although the FBI does not track the dollar amount lost each year to mortgage fraud, incidents reported by financial institutions jumped a whopping 31 percent (from 35,617 to 46,717) in fiscal 2007, over the previous year. The sudden spike in HELOC fraud prompted the Mortgage Asset Research Institute, a Virginia-based organization that tracks mortgage fraud, to add identity theft as a category to track.”

According to the article, many experts believe that the shift to home equity fraud has happened because it is now more difficult for identity thieves to take out subprime loans in the name of less credit-worthy borrowers.

Protect yourself from home equity fraud by checking your credit report regularly. Everyone is entitled to see a copy of their report annually at no cost.

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New Program Detects HELOC Application Fraud

HELOC Identity Theft Scams

“BasePoint Analytics(TM), a leading provider of scientific fraud and risk analytic scoring solutions, today announced the availability of FraudMark(R) for Home Equity, the industry’s only fraud detection solution designed to address the home equity market, enabling lenders to fund loans with confidence…

The FraudMark for Home Equity solution applies BasePoint’s proven pattern recognition analytics to new loan applications, enabling lenders to focus investigation on the most risky applications before spending resources for underwriting and external verifications.”

This program may help lenders avoid awarding bad home equity lines in the future. However, it seems that the current problem of poor performing home equity portfolios has more to do with lax lending standards and dishonest brokers rather than borrowers trying to trick the system.

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Is a HELOC Right for You?

How to Qualify for a HELOC

HELOC Loan-to-Value Ratio Requirements Get Tough

“A home equity line of credit is an ideal vehicle for criminals, according to Steve Bartlett, chief executive of the Financial Services Roundtable, a consortium of banking-related companies that offers financial support to the Identity Theft Assistance Center.

Mr. Bartlett said such credit lines are typically “big pools of money,” and if consumers do not regularly check their accounts, that pool can drain quickly…

Now that lenders have vastly tightened their lending criteria, criminals who specialize in mortgage fraud have little choice but to move upstream and seek out victims with good credit.”

If you notice anything suspicious when checking your credit, notify your HELOC lender immediately. The sooner you catch a problem, the higher your chances of a positive outcome.

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How a HELOC Works

Here’s how the scam works:

“Some con artists steal consumers’ identities to drain Home Equity Line of Credit (HELOC). These HELOC loans differ from standard home equity loans because a homeowner can borrow against a line of credit. In many cases, con artists pose as customers to open HELOC Internet account services. They manipulate customers’ account verification processes, including rerouting telephone calls, forging signatures, using passwords, and reciting recent account histories. A con artist, for example, may use a consumer’s information to contact a financial institution and request an advance on a account. Once the advance is given, the con artist sends a fax to the financial institution and requests the funds be transferred to another account. When the financial institution receives that fax, it contacts the account holder to verify the transaction. The call, however, is unknowingly forwarded to the con artist, who verifies the account holder’s information to complete the transfer.”

If you’re a HELOC customer, be sure to keep your financial records private. Instead of throwing away past statements and credit offers, shred them. When going to financial websites (such as your bank’s site, your bill pay site, or your student loan site) type the complete URL into your internet browser instead of using an auto-fill feature.

If you notice any suspicious withdrawals from your HELOC account, notify your lender immediately. It’s better to be mistaken than to end up another HELOC identity theft victim.