Structured Finance Association Releases Fraud Mitigation Survey Findings

On Tuesday March 31, the Structured Finance Association (SFA) published the results of its Fraud Mitigation Survey. SFA’s Fraud Mitigation Task Force worked with Ernst & Young to develop and administer a survey on the state of fraud mitigation and detection in the securitization industry. Respondents included market participants from across the securitization industry, including issuers, originators, trustees, servicers, rating agencies, data & analytics firms, and investors.

The goal was to understand how securitization market participants perceive fraud risk, which includes topics like double-pledging, fictitious loans, or altered collateral and to identify areas where cross-industry coordination can occur to help reduce fraud risk.

Key Points

• Variations in oversight and monitoring practices across transaction stages create inefficiencies and gaps in transparency.
• Respondents identified double-pledging of collateral as the most concerning fraud risk, with fictitious loans and originator misrepresentation also cited frequently.
• Market participants believe automation, improved analytics, and AI/machine learning can strengthen fraud detection, but legacy systems and inconsistent data quality slows progress.
• Task force members advise focusing on resolving structural elements of fraud arising from the operations and mechanics of securitization

SFA will establish asset class working groups (Auto ABS, Consumer Loan ABS, RMBS and CRE/CMBS) to explore sector-specific nuances, map financial transactions, and develop recommendations for improved collateral tracking throughout the lifecycle.