Property analytics provider CoreLogic released its annual mortgage fraud trend report this month, showing fraudulent activity was up marginally in the second quarter of this year compared to the same period last year. The report reveals that 12,718 applications (0.7 %) of U.S. mortgage applications displayed fraud in the second quarter of 2016. During the second quarter of last year, the number of fraudulent applications was slightly higher, at 12,814 – however that represented a smaller 0.67% of the market.
CoreLogic’s Mortgage Application Fraud Risk Index (FRI) is based on residential mortgage loan applications. The index analyzes counterfeit activity across identity, income, occupancy, property, transaction and undisclosed real estate debt.
Mortgage fraud rate rising annually, report indicates
Nationally, the FRI jumped 3.9% points year-over-year in the second quarter, continuing the steady increase seen ever since the third quarter of 2010. Given loosening lending standards in comparison to the period immediately following the recession, the jump was anticipated, the report says.
Given the boost in purchase loans in contrast to home refinancing, fraud is now riskier due to overall transactions. High-LTV purchase loans are easier to manipulate and provide an increased profit opportunity, the report says.
Mortgage fraud types and trends
Year-over-year, income fraud risk jumped 12.5% points across the country. Income fraud is classified by misrepresentation of existence, continuance, source or amount of income used to qualify for a mortgage.
Transaction fraud, up 3.2% points annually, is when the nature of transaction is altered. Inaccurate down payments and undisclosed agreements come under this category of deceit.
Occupancy fraud risk increased 2.9% points year-over-year. Mortgage applicants performing this type of fraud lie about a home’s intended use, categorized as primary residence, second home or investment property.
Undisclosed real estate fraud, or intentionally neglecting to disclose real estate debt, is down 3.4% points year-over-year.
Identity fraud is down 10.8% points annually. Identity fraud is when an applicant uses a stolen or false identity to obtain a mortgage.
Meanwhile, property fraud risk – intentionally falsifying property details – dropped 14.2% points ever since the second quarter of 2015.
Where is mortgage fraud rising?
While Florida is still riskiest state for mortgage application fraud, the Sunshine State posted the biggest reported annual decline in risk. Miami-Fort Lauderdale-West Palm Beach, where the risk index is 278, showed an 18.1% point year-over-year drop in fraud risk – but it still ranks as being the riskiest metro within the U.S.
New York is within the top 5 states for income, property and occupancy fraud risk. New York is no. 2 riskiest in application fraud risk and showed an increase of 12% points annually. The New York City metro risk index grew to 210, which is up 10.4% points year-over-year as being the fourth riskiest metro.
Washington D.C. is in the top five states for income, occupancy and undisclosed real estate debt application fraud, the report shows. Application fraud risk in D.C. increased 3 % points year-over-year.
Application fraud in California, most often related to undisclosed real estate debt and transaction deception, is up 5% points year-over-year.
In Los Angeles-Long Beach-Anaheim, CoreLogic’s risk index jumped 9.7% points, to 164, ranking no. 9 in riskiest metros. In San Francisco, the application fraud risk index increased 9.3% points to 138, making it the 20th-riskiest metro in America on the list.
Illinois’ application fraud risk dropped 7.8% points since last year, officially moving out of the top 10 states. While Texas is not a high-ranking state for mortgage scams, the riskiest mortgage.
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(all data current as of
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$800,000-
Lot Size22,216 sqft
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Home Size1,982 sqft
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Beds
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Baths
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Year Built1955
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Days on Market2
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