Fraud 9: Fraud Prevention Playbook: A Step-by-Step Screening Checklist for Underwriters

When you're in the thick of underwriting, it's easy to get caught up in the momentum of closing. The emails, the deadlines, the "just need this signed today" pressure—it all adds up. But the files that blow up later? They're almost always the ones where someone skipped a step.

That’s why I started building my own mental checklists years ago—then turned them into a written one. Those Checklists from part of the underwriting documents I use daily.  Because fraud doesn't usually come with flashing lights. It hides in quiet inconsistencies. This post shares a practical, screening process to help underwriters stay sharp, methodical, and protected.

Step 1: Verify Identity (for real)

• Collect two pieces of ID—at least one government-issued photo ID.

• Match name, date of birth, and address across ID, application, and credit bureau.

• Red flag: Blurry ID, mismatched addresses, expired documents, or refusal to show ID in person.

Step 2: Review the Credit Bureau—Don’t Just Scan It

• Check employment and address history. Do they line up with the application?

• Note recent inquiries—especially from multiple lenders.

• Look for missing liabilities or recently closed loans (could be undisclosed borrowing).

• Watch for fraud alerts or consumer notes.

• Red flag: Credit score is high, but credit history is thin or recently built.

Step 3: Scrutinize Income and Employment

• Employed? Collect job letter, pay stubs, T4s, NOAs.

• Self-employed? Request full financials, business bank statements, and two years of tax filings.

• Cross-check deduction amounts (CPP, EI, tax) on stubs—do they make sense?

• Call the employer—not the number on the job letter, but one found independently.

• Red flag: Perfect round income numbers, inconsistent job history, unverifiable business, fake email domains.

Step 4: Trace Down Payment and Assets

• Request 90-day bank histories from accounts supplying funds.

• Investigate any large or unexplained deposits.

• For gifts: confirm with a signed gift letter, proof of funds from the donor, and ideally a call (with consent).

• Red flag: “Gift” funds vanish after closing, donor has no clear source of funds, or multiple borrowers receiving gifts from the same person.

 Step 5: Appraisal and Property Review

• Confirm the appraiser is licensed and independent.

• Read the full report: address, comps, photos, and valuation logic.

• Compare appraised value to purchase price—exact matches are suspicious.

• Check title history—any recent flips or POAs registered?

• Red flag: Weak comps, recycled reports, appraiser connected to borrower/broker.

Step 6: Apply the “Makes Sense” Test

Step back and ask:

• Does this borrower’s profile fit the loan they’re asking for?

• Would someone with strong credit and income really be using a private lender at 9%?

• Are all documents internally consistent?

• What’s their plan for repayment or exit?

If something doesn’t line up, that’s not being paranoid. That’s underwriting.

Step 7: Document Every Resolution

• If you found a red flag, write it down.

• Note how it was resolved (e.g., called employer on April 4 at 10:30 AM; confirmed details with HR).

• If something can’t be resolved—stop the deal. Period.

A Checklist Is a Safety Net

No checklist catches everything. But using one dramatically reduces the risk of missing something obvious—or getting pressured into overlooking a concern. And when the file is sitting in front of you with six-figure exposure, it’s good to know you’ve done your part.