In Q2 2025, nearly 46.63% of transactions within an approximately $81 billion portfolio across residential, commercial, and business-purpose loans were flagged for issues indicating a significant risk of wire and title fraud, according to data released by FundingShield, highlighting ongoing challenges with existing controls.
During Q2 2025, FundingShield’s analysis of an approximately $81 billion portfolio, encompassing residential, commercial, and business-purpose loans, revealed that nearly 46.63% of transactions were flagged due to risks of wire and title fraud. Each problematic loan averaged 2.2 issues, suggesting that current detection and resolution mechanisms by closing agents and lenders are often insufficient before closing.
FundingShield, a provider of fraud prevention and data integrity solutions for the mortgage and settlement services industry, proactively identifies and blocks risks prior to fund transfers. This approach aims to prevent wire fraud by ensuring only verified and authorized parties are involved in the disbursement process. The company’s solutions are utilized by a range of entities including banks, credit unions, law firms, disbursement agents, warehouse lenders, Non-QM lenders, private credit funds, PE firms, and direct lenders involved in US real estate and finance. A representative from FundingShield stated, “As fraud risks and regulatory expectations grow, we must strengthen controls around data accuracy, third-party oversight, and transaction integrity. These needs are reflected in FHFA guidance, GSE selling guides & MORA Audits, and compliance standards.”
The second quarter of 2025 saw consistent elevated levels of errors related to CPL (Closing Protection Letter) validation, affecting 9.4% of transactions for critical data points such as borrower information, vesting/vested parties, and property addresses. This contributed to 44.43% of transactions having CPL-related issues. Wire-related errors impacted 8.57% of transactions in Q2, marking the seventh consecutive quarter above 8% for this category. License issues remained at 5.1% from Q1 to Q2 2025, primarily due to lapsed, terminated, or suspended licenses and inconsistent data when cross-referenced with registrars and licensing bodies. These persistent issues, combined with data mismatches, indicate a need for enhanced source data verification in workflows and the use of trusted datasets in critical processes.
Quarter-over-quarter comparisons from Q1 2025 to Q2 2025 showed license issues at 5.11%, wire instruction issues at 1.97%, and insurance issues at 103.81%. Recent regulatory initiatives underscore the importance of proactive fraud detection and data integrity. Fannie Mae, in collaboration with Palantir, has launched advanced analytics programs to detect fraud and anomalies in loan data, signifying a broader industry move towards real-time risk monitoring. FundingShield previously aligned its services with the FHFA’s stated goal of reducing fraud in the mortgage market. The FHFA has emphasized the need for stronger controls in the closing process, particularly given increased fraud activity in both residential and multifamily lending. These efforts align with existing compliance requirements under the Dodd-Frank Act, CFPB service provider oversight rules, and GSE seller/servicer guidelines, all of which mandate vetting and monitoring of third-party service providers. FundingShield has been referenced in recent MORA Audits by Fannie Mae, which seek validation of transaction-level controls and closing agent data, licensing, good standing, and enforceability of claims.
These trends highlight the critical need for source data verification and the utilization of trusted, independently validated datasets in closing workflows. Without such controls, lenders face increased exposure to fraud, compliance violations, and post-closing recovery challenges. CPL validation serves as a verifiable control supporting these mandates by confirming the legitimacy of the closing process and the involved parties. FundingShield supports these industry efforts by providing real-time validation of closing agents, licensing, insurance, and transaction data, assisting institutions in meeting regulatory requirements, reducing fraud exposure, and improving loan quality through verified data.
