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Stolen Identity Scam Applicant Chicago Housing Providers Must Be Prepared For

Stolen Identity Scam Applicant Chicago Housing Providers Must Be Prepared For

Landlords & Property Managers are always discussing the importance of tenant screening and you read about it being the “One Thing” to having success when it comes to renting out your investment properties. There are huge problems in the way we underwrite and screen tenants right now and I can see that with the numerous stories I am hearing of applicant scams passing through professional screening systems.

We as a community are not sharing enough information regarding the problems going on.  Over the last 12 months I am seeing these scams be run on accidental landlords, professional landlords, Realtors, & Property Managers.  I have my pulse on the Chicago and Chicago suburb market but I am hearing about it around the country too.  Maybe these housing providers are blinded by the “too good to be true” applicants or afraid of violating Fair Housing Laws but in this article we will talk about the Stolen Identity Scam Applicant (SISA) and what we need to be aware of when underwriting and screening tenant applications.

What Is A Stolen Identity Scam Applicant (SISA)?

In the last several years it’s become much easier to make a connection online or on the street with someone that will sell a fake identity.   Your future applicant will buy someone’s entire story including social security number, drivers license, and all the public records that come with it.  The person applying for your place is using someone else's personal information to commit fraud. It is appealing to underwriters at first glance because the information being used is almost too good to be true. Often the stolen identity has 800+ credit, makes 6 figures per year, owned a house before, and has hundreds of thousands of dollars in the bank with a statement they provide you which also happens to be fake.  

These SISAs will apply and seem super nice and accommodating. They often apply sight unseen with some lie that runs with the story of their stolen identity.  As an example, a SISA that came through last month had a home for sale in Michigan and she had to rent a place quickly because that house was closing.  She created the out-of-state scenario because it was a great story that made sense and explained why she was applying without seeing the unit.  On the surface the story was logical because the current address listed on the application was an address that we could find on the internet and we confirmed the property was under contract for over 30 days.

The terrifying part of these situations is that the applicant being approved is not the person moving into your property. In fact, the identity of the actual person living in your unit is completely unknown.   

What Are Red Flags Of A SISA

Anyone that has been through this can look back and see that there are multiple red flags that were missed. These are obvious discrepancies that would be discovered with a little more investigative work.  Housing providers fail because they were so impressed by the application quality that they might have skipped a step in their underwriting process or didn't take a deeper dive into employment, rental history, or information on the credit report that doesn’t align with the applicant.  Below is what you need to look out for.

  • Fake Drivers License - The identity will have the applicants picture on a state ID or driver's license with all of the stolen identity information.  We recently upgraded our software requiring applicants to scan their face and their ID but even that isn't 100% full proof. We also look for other imperfections on the ID such as an incorrect background color or mistakes in the birthdate or address. This gets even more difficult to identify when the ID is not an Illinois issued ID because we have to look into other states' format.  

Dig Deeper  - Have face scanning software, study the state issued ID format, or ask for additional identification forcing them to admit they don't have more. Be aware that the applicant may produce additional identification such as a social security card or work ID so you have to really do your research. 

  • Fake Pay Stubs - When an applicant submits their proof of income, especially pay stubs, pay close attention to the deductions and watermarks. Look to see if check numbers match pay stubs, too. You’ll see that the deductions on the paystub didn’t add up correctly. As an example, if you look closely on the right side of an ADP paystub (one of the more common) the check says “ADP”. However, there is no ADP logo at the top of the paystub. Most ADP checks show the logo. 

Dig Deeper - Research payroll companies standard templates, be sure the math adds up, net income matches what was placed on the application, or you can do what we did with investing in a document scanner that will highlight documents that are not original or have inserted text within a document. 

  • Applicant’s Employer - Most of the time the employment information is fake along with the paystubs above so be diligent about checking on employment. Does that make your Spidey Sense tingle? It should! Time to get out that magnifying glass, better known as Google, to learn more about the applicant’s employer. 

Dig Deeper - If a quick search doesn’t turn up the supposed employer or if an elderly person answers the “business” phone confused about why you’re calling, get suspicious. Sometimes when you ask for additional documentation like a W-2, the scammer knows you’re onto them, and they vanish. 

  • Information On Applicant Incorrect - It sounds funny but often the scammer messes up the scam and puts the wrong information on the application or the story doesn't line up with the applicant.  Recently on an episode of Straight Up Chicago Investor Podcast, guest Victoria Barkate told us about a bad tenant experience where the application said the prospect was 57 years old but the person that showed up was 37 years old.  At the time she thought it was an easy typographical error or she doubted herself thinking she didn’t read the applicant correctly. In hindsight, the tenant messed up the story.   Right there on the show we explained to Victoria and the audience what a SISA was.

Dig Deeper - As an applicant human error comes often when red flags are overlooked so don't let any red flag of information that seems off get past you without digging deeper.

  • Connecting With Prior Landlord - You will never be able to connect with the prior landlord or you call a random number that doesn't give you much info.  If the applicant shows they are renting make sure you have clear proof of payments that are electronic or cleared checks.  

Dig Deeper - Often the applicant is a current homeowner but that mortgage is not on their credit report or they say they own the property free and clear.  If they are a homeowner the recorded deed will be public record and you can see their signature on the deed to see that it matches their signature elsewhere, perhaps on the state ID or driver’s license. 

List Of Other Obvious But Missed Red Flags 

  • Adults with 100k+ in the bank account typically do not make all their payments using the Cash App
  • People will not use the reason moving closer to work over a few mile difference
  • SISAs will push for a fast approval and often be aggressive if you continue to ask for more information.  We have even had a SISA threaten fair housing violations as an attempt to scare us into approving their application.
  • Initial funds will come in the name of someone else.  Since the person they are stealing from isn't the person moving in, the last red flag you have is to call them out when the initial move in funds come from their friend or their sister.
  • Many times the credit report will show the applicant’s employment history. If the prospect states they work in the trucking industry but the credit report shows a medical facility, there’s your red flag.
  • Double check that the person identified as the landlord is the actual owner of the property. Many times applicants provide contact information for people that have no affiliation with the property they are renting. 

What Can We Do To Prevent The SISA Trap

There are a few things you can do to prevent this trap and it starts with having a rental screening system.  A rental screening system doesn’t just pull credit and background checks.  There is much more to it and it includes providing a risk assessment, talking to prior landlords, breakdown of total income, payment history assessment, and can even calculate their potential to pay in the future.  It sounds like a lot of effort but like any process if you put the time in up front it will pay back with ease of doing business over time.  We use a scoring system to figure risk and anything we are unable to confidently prove will raise our risk level.  

Often a way to offset risk would be to hire a local real estate broker, but these days if that broker is not doing many rentals they are not seeing these trends. They may not be aware of the scams until they have learned the hard way and been burned by a SISA.  This is not meant as a criticism of local brokers, but if you are working with a broker make sure you share this article with them and if you are a managing broker share this with your team.

What Happens If I Have A SISA In My Property Now

Not All SISA’s apply and move in with the intent to not pay.  I have heard of SISAs that go 14-18 months before the cracks of being able to keep up with rent starts to show.  Often someone wants to do the right thing but they know they have no chance of getting approved so they take this route of buying a fake identity to increase their chances of an approval.  They were not qualified to rent the place so no matter how good their intentions were, as time goes by their lack of qualifications will start to seep through in the form of late payments, missed payments, disorderly conduct, or complaints by neighbors.  

If you have someone in the property now you think is a SISA seek advice from an attorney.  Unfortunately there isn't much that can be done around criminal charges and you most likely will have to go the route of filing for eviction.  

Hiring a Property Manager to unload this level of risk is a great investment.  Property Managers, like GC Realty & Development, LLC, have learned the hard way on this topic and have revised the entire showing and screening process to make sure we catch these 100% of the time.   We have technology with face recognition ability, fraudulent document detection, and the systems to drill down into any specific area to drag out information to bring the fraud to the surface.  

Have you been hurt by this already?  Feel free to call us and we can advise you on next steps and check out other resources we have for Chicago Landlords.

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