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Smooth Criminals: How To Protect Your Property from the New Generation of Rent Fraudsters

Pictured: Paula Cino, VP for Construction, Development and Land Use Policy at National Multifamily Housing Council, Jay Rawls, Sr. Director of Operations & Technology at Northwood Ravin, Aaron Victorson, SVP of Sales and Revenue Operations at TheGuarantors
Pictured: Paula Cino, VP for Construction, Development and Land Use Policy at National Multifamily Housing Council, Jay Rawls, Sr. Director of Operations & Technology at Northwood Ravin, Aaron Victorson, SVP of Sales and Revenue Operations at TheGuarantors

With new rent fraud techniques trending on TikTok, finding trustworthy rental applicants has never been more challenging.

Multifamily operators have to deal with increasingly sophisticated identity theft and document forgery on top of the lingering impacts of the pandemic and stringent fair housing regulations. In this environment, operators need to be savvy to the various scams being perpetrated and in turn, strategic in their response. With all these challenges in mind, rent protection company TheGuarantors recently brought together a panel of experts to discuss the new types of fraud facing the industry and how they’re responding. Aaron Victorson, SVP of Sales and Revenue Operations at TheGuarantors, moderated the panel, which featured Adam Pasternack, President of Property Management at Russo Development, Jay Rawls, Sr. Director of Operations & Technology at Northwood Ravin, and Paula Cino, Vice President for Construction, Development and Land Use Policy at National Multifamily Housing Council. 

The Internet/Pandemic Double Whammy

Renter fraud is nothing new, and before the pandemic, operators had a robust system of checks in place to verify an applicant’s identity and any financial information they might provide. But two factors caused a major increase in the amount and sophistication of fraud: social media and COVID-19.

“It’s become easier than ever to obtain fake identities online,” said Rawls. “Individuals selling fake documents have easy-to-use websites…they now have Instagram pages with large followings, they post more than ever on Facebook Marketplace.”

As the information about how to commit fraud proliferated across platforms like Instagram and TikTok, eviction moratoriums put in place during the pandemic made it more difficult for operators to evict fraudulent tenants when their deception was discovered.

“Fraudsters learned they could do this with no ramifications,” explained Rawls, who pointed out that fraud is more common in jurisdictions with years-long eviction backlogs. Add to this the increased notice time required by the CARES Act, which was signed into law during the pandemic and is still on the books, and the scales seem tipped in the favor of fraudsters. 

Fraudsters also took advantage of another pandemic-era change in how rental offices operate. Cino pointed out how the industry bent over backwards to create “touchless, online opportunities for somebody to actually get into our communities.” While these new processes were a boon to applicants and leasing agents navigating the socially distant pandemic landscape, “at the same time that just enabled all these pathways for fraudsters to take advantage.”

The one-two punch of fraud influencers and the pandemic increased the amount of fraudulent applications pouring into leasing offices and then made it more difficult for operators to evict tenants who then weren’t able to pay rent once they had moved in. Layer this on top of a market where landlords are competing for tenants due to oversupply of housing in certain areas and you have the perfect conditions for fraud to flourish.

And renter fraud isn’t just an issue for the building owner. The vast majority of renters who don’t commit fraud during the application process suffer as well, from their rent going up due to bad debt incurred by the building from fraudulent renters to increased danger caused by criminals living in their community. Rawls told the audience about an operator he knew who had two murders on his properties in the last year, both of which were committed by tenants who moved in “as a result of rent fraud.” 

New Fraud, Who This? 

The panelists went over some of the newest types of fraud and why they’re so difficult to catch during the application process. 

“Even though fraud has been present in industry, it’s really evolved over the past 12 months, and the rate of fraud has increased,” said Victorson. “70% of operators have seen that increase.”

One of the most common types of fraud involves an applicant using another person’s social security number to fool the operator into believing that they have better credit than they actually do. 

“They’re finding somebody with a similar name, living in a similar place or somewhere they have lived in the past,” explained Victorson. “It’s not a perfect fit, but it’s a close fit. So it’s kind of easy to miss.”

In a similar vein, many fraudsters will forge rental histories or income records in order to appear to be more reliable or to have more money. While social media and unregulated spaces like Facebook Marketplace make these forgeries easier to acquire than ever, there’s another side to this fraud.

“The gig economy and new types of jobs that haven’t previously existed have had an impact on the increase in fraud,” says Rawls. While vetting a renter’s financials used to be as easy as asking for pay stubs, many workers today earn a legitimate living through gig work or via ecommerce sites like Etsy, making traditional verification methods useless. 

While Rawls says his company has expanded the type of income verification that it accepts, he also shouts out TheGuarantors, whose lines of products includes surety bonds designed to give landlords the ability to mitigate the risk of renting to applicants without traditional income sources.

Operators Must Change With the Times

So how are operators fighting back? In addition to protecting themselves with financial products like those from TheGuarantors, the panelists mentioned a host of strategies that are helping them combat fraud while still providing fair housing opportunities for the vast majority of honest applicants.

“We try to catch everything on the front end,” explained Rawls, whose firm has rolled out a combination of ID verification and facial recognition solutions to combat impersonation fraud as well as AI tools to verify financial information.

While employing high-tech solutions is one piece of the puzzle, Cino pointed out that sometimes the old ways work the best. “What we’re hearing is that many housing providers are going backwards in time, redeploying some very basic tools” said Cino. “Identity documentation, verification of income, following up on employer references, those are things that in many cases we had moved away from, and now we realized that that is actually an important roadblock to interrupting that fraud pipeline.”

Regardless of the solutions employed to combat fraud, the panelists emphasized the importance of keeping the application as streamlined as possible to ensure that the majority of applicants who are being honest have a positive experience. 

“We become so focused sometimes on the fraud, and while it’s important, that’s still a minority of our applicants” said Rawls. “We don’t want to create a process to address this problem that’s so difficult that they just get frustrated. And it’s really hard to recover when a resident has a bad first experience interacting with you.”

Watch the entire panel discussion here, and reach out to TheGuarantors to learn how the company helps increase access for renters and mitigate financial risk for operators, keeping the renting journey smooth and safe.