Latin American banks unite against the growing wave of mortgage fraud
By Rico on 30 October 2024
Q24N (EFE) Executives from Scotiabank, HSBC and Citibanamex, among other financial institutions, met at the 11th National Convention of SOC Financial Advisors in the Riviera Maya, Quintana Roo, Mexico, to address the growing problem of mortgage fraud in Latin America, which has tripled in the last three years.
The objective of this meeting was to analyze the causes of this phenomenon and establish joint strategies to combat it, with measures such as strengthening the “know your client” schemes, the implementing of biometric analysis, and stricter controls.
The vice president of Mortgage and Auto Credit at Scotiabank Mexico, Paulina Prieto Higuera, expressed her concern about the increase in cases of fraud in the region, stating that “three years ago we knew of none or very few.”
Prieto Higuera detailed the three most common types: identity theft, employment or income fraud, and appraisal fraud, for which he urged the implementation of more robust preventive measures.
This increase coincides with the results of the ‘Study of the true cost of fraud in Latin America’ conducted by Forrester Consulting, which indicates that 54% of Mexican companies reported an increase in fraud in the last year.
Measures to combat fraud
Miguel Saucedo, director of Saucedo y Abogados, noted that mortgage fraud “has become more recurrent in recent years,” both in Mexico and in Brazil, Colombia and Central America.
He mentioned, in this regard, that the country’s banks and the College of Notaries are implementing measures such as the collection of biometric data to counteract the risk of identity theft.
In his speech, Saucedo revealed that 35% of the trials currently being handled by the firm he leads in relation to real estate loans “are derived from mortgage fraud”, emphasizing that the implementation of oral trials in mortgage matters starting in December, derived from the new National Code of Civil and Family Procedures, could reduce the time of judicial proceedings.
For his part, Enrique Margain, executive director of loans to individuals at HSBC and President of the Credit Commission and Coordinator of the Mortgage Committee of the Association of Banks of Mexico, emphasized the importance of a solid “origination”, referring to the fact that one must “know the client well, go to where he says he works and visit the property that is the object of the financing”, as a key strategy to prevent fraud.
Thus, the director of Mortgage Banking at Citibanamex, Gonzalo Palafox, agreed on the importance of “knowing the client well” since “those who try to commit fraud present false work documentation”.
This approach is relevant in Latin America, where 51% of total losses due to fraud occur through digital channels.
Mortgage loan resilience
As host of the convention and a key player in the Mexican mortgage sector, Fernando de Abiega, CEO of SOC, Leaders in Financial Advisory, highlighted the importance of collaboration between entities to face the challenge of fraud.
“We place 1 in 5 mortgage loans in the country, and we will continue to work closely with our financial partners to reach a greater number of people,” he said.
Margain highlighted the resilience of mortgage credit in Mexico, ensuring that, despite the increase in interest rates, “the credit portfolio of the sector is healthy,” since in 2023 around 126,000 mortgage loans were granted, and it is expected that in 2024 the figure will adjust to 120,000.
Cooperation between institutions, Abiega points out, is therefore essential to protect both financial institutions and clients and to ensure confidence in the mortgage system, which, according to the ‘Study of the true cost of fraud in Latin America’, 84% of respondents consider to be one of the main concerns of financial institutions in the face of fraud.
