Red flags that could signify fraudulent activity among applicants in rental housing are on the rise, according to a new fraud analysis from TransUnion (NYSE: TRU). Since the start of the pandemic, the percentage of fraud triggers detected through TransUnion’s multi-layered rental housing fraud solution, ResidentID, increased nearly 30% from the period of March 2020 to August 2020.
Fraud triggers, defined as applicant statuses with failed authentication and/or identified as high risk, reached a high of 15.2% in August 2020, compared to 10.3% over the same period last year. Over the course of the pandemic, this rise in fraud triggers has not only left an impact on the rental industry, it has also placed multifamily executives on high alert for fraudsters.
ResidentID Detects Increase of Fraud Triggers During the Pandemic
Percentage of Fraud Triggers
“Fraud continues to be an increasingly concerning issue in the multifamily industry for the last several years and the COVID-19 pandemic driven shift to virtual leasing has pushed this concern to the forefront for property managers,” said Maitri Johnson, vice president of TransUnion’s tenant and employment business. “It is imperative that management companies take the necessary precautions and protect their business against the economic impacts brought on by the current environment, as well as the increased propensity for fraud that may not be easily evident today.”
To gain a greater understanding of the impact fraud has had on the multifamily rental housing industry, TransUnion conducted a survey of 82 multifamily executives in September 2020 to explore how they are managing fraud challenges in this changing environment.
The survey found that since the pandemic began, the frequency of fraud incidents have increased for 48% of respondents with another 26% experiencing up to 100 instances of fraud in their portfolio in the past year. While many of these organizations were able to flag fraudsters prior to move-in, 41% of respondents stated they did not identify the fraud until after the applicant moved-in – resulting in a negative impact to the organization’s bottom line. The recent volatility in the market led two in three executives (67%) to say they are concerned about future fraud growth within their communities.
“As fraud evolves and fraudsters become more sophisticated in their techniques, fraud prevention strategies and solutions have become top of mind for industry insiders. As a result of the COVID-19 pandemic, 22% of respondents noted an identity verification or fraud solution has been implemented to help mitigate this growing issue,” added Johnson.
Customer Case Study Shows the Value of Early Fraud Detection
The increase of fraud presents challenges from both an operational and fiduciary perspective for the multifamily industry. However, a recent case study with Bridge Investment Group, a national owner and operator for both large and small real estate investors, found that early fraud detection can offer a significant value proposition for operators.
The case study found that within a 12-month period, 16% of more than 7,000 renter applications triggered a red flag for potential fraud. Of these flagged applicants 10% were unable to correctly answer personal identification information questions (or one-time passcodes), and another 6% were flagged as unable to be verified.
“To optimize our credit check process we needed an effective front-line defense to validate the identity of applicants before move-in,” said Tim Reardon, chief operating officer of Bridge Investment Group. “By using TransUnion’s ResidentID solution, high-risk applicants were immediately flagged to deter the applicant from continuing the screening process whereas less risky applicants were required to validate their identity by answering personally identifiable information questions about themselves. This provided us with a more extensive look at applicants’ level of risk at the very first touchpoint, resulting in significant savings.”
The presence of these early fraud detection measures prompted additional identity verifications – causing fraudulent applicants to abandon the application process. As a result, Bridge yielded nearly $1.1 million in fraud related savings.
Additional findings from the Bridge Investment Group Case Study can be found here. For more information on the benefits of powerful identity verification solutions, please visit: https://www.transunion.com/product/residentid.
About TransUnion (NYSE: TRU)
TransUnion is a global information and insights company that makes trust possible in the modern economy. We do this by providing a comprehensive picture of each person so they can be reliably and safely represented in the marketplace. As a result, businesses and consumers can transact with confidence and achieve great things. We call this Information for Good.®
A leading presence in more than 30 countries across five continents, TransUnion provides solutions that help create economic opportunity, great experiences and personal empowerment for hundreds of millions of people.