TBO.com - Tampa Bay Online
Email
Print
Miami Firm Strikes Gold With Mortgage Crisis
ADVERTISEMENT
Published: March 31, 2008
MIAMI - It's the equivalent of a body cavity search, but for home loans. The 1003 AppScan, an automated Web-based filter, subjects mortgage applications to more than 150 tests designed to extract both little white lies and criminal schemes used to defraud lenders.
It is the signature service developed by Verification Bureau, a fraud prevention and detection firm in Miami founded by three Florida International University students - before mortgage fraud reached epidemic levels in the real estate boom.
Now, as financial institutions face more than $100 billion in losses from failed loans, with batches of them poisoned by fraud, the company is watching business pour in.
When it opened six years ago, Verification Bureau joined a niche industry that helps lenders filter out fraud during the underwriting process. Nationally, fewer than a dozen such firms offer an extensive set to tools to weed out bad apples.
Esteban Reyes, 27, co-founder and chief executive, said he spotted the opportunity while working part time at a mortgage company in graduate school.
"They had a need, and they didn't know how to do it," Reyes said.
With the help of classmates turned colleagues Juan Carlos Perdomo and Diego Espinosa, also Colombian nationals, he set out to create a technology answering the need. Verification Bureau employs 12, several of whom staff a customer-service call center in Colombia.
Through its 15-second screening, process, customers upload an application into a proprietary system that compares the information against databases for authenticity.
Services encompass background screenings; income verification directly with the Internal Revenue Service, for which Verification Bureau had to go through a stringent approval process; identity verification with the Social Security Administration; criminal background checks; credit reports; and employment and education checks, among other facts.
Loans are scored for risk, and a report is generated with any red flags. The service costs about $20.
Although the company's clients cover a range of industries prone to identity and financial fraud, including insurers, human resource departments and health care providers, its more than 2,500 accounts come mainly from the lending industry.
While other credit-related sectors founder in the housing downturn, Verification Bureau has found itself in the rare position of having profited from the lending wave and profiting even more from the bottoming.
At the height of the frenzy, interest rates were low and property values were rising. Underwriting standards were loosened to speed the processing of a flood of applications by lenders who felt protected by appreciating property values.
"Even if you had to foreclose on a property and sell it, you were still making a profit as a lender," said Jeff Moyer, senior vice president for Interthinx, a California company that provides fraud detection services.
The unusual market conditions allowed Verification Bureau to rake in more than $800,000 in revenue its first year. Marketing involved cold calls, mailings and visits to trade shows to lure new customers.
Since then, growth has been vigorous. Reyes said the company verified almost 40,000 loans last year, ringing up $3 million in sales.
Expansion plans include developing a tool to verify immigration status, which they will market to the hiring industry.
Email
Print
TBO.com - Tampa Bay Online Member Agreement | Privacy Statement | Work With Us
