Mortgage Fraud Risk Drops 8.9 Percent, CoreLogic Reports

CoreLogic examines fraud risk across the nation.
Click on chart to enlarge.

Click on chart to enlarge.

By Jeffrey Steele, Contributing Writer

Irvine, Calif.—As of the end of the second quarter of 2015, there was an 8.9 percent year-over-year decrease in fraud risk, as measured by the Mortgage Application Fraud Risk Index. That is the finding of global property information, analytics and data-enabled services provider CoreLogic in its latest Mortgage Fraud Report. Also included in the report was an estimation that the total value of applications with fraud or serious misrepresentations stood at $17.3 billion for the 12 months ending the second quarter of this year, as compared with $19.8 billion one year earlier.

Report highlights indicate that several states were notable in terms of mortgage fraud. The nation’s highest risk state continued to be Florida, while New York climbed from number three this year to number two last year.

The District of Columbia replaced Rhode Island in the top 10. Kansas registered the largest decline, at 35.2 percent, while Louisiana was the state with the highest year-over-year growth in mortgage application fraud risk.

Continuing a trend seen over the past five years, jumbo mortgages displayed the greatest fraud risk. They were trailed in second place by low-down payment mortgages.

CoreLogic’s Mortgage Application Fraud Type indexes include six components. Of them, only undisclosed mortgage debt risk showed an increase, 1.7 percent. The largest year-over-year decline was in identity risk, which fell 22.7 percent.

“New regulations, like Qualified Mortgage (QM) and Ability to Repay (ATR), as well as stricter credit overlays, have resulted in greater scrutiny of mortgage applications,” said Susan Allen, senior vice president of Mortgage Analytics at CoreLogic. “Greater scrutiny, in turn, has had a positive impact on the rate of fraudulent applications.”

“In the markets where fraud remains strong, there are also significant inventories of distressed properties,” Allen continued. “Typically, this leads to large value discrepancies with nearby properties, which increases the risk of incorrect valuation, fraud-for-profit schemes and occupancy fraud on properties recently converted to rentals.”

In second quarter 2015, there were indications of fraud in 12,814 mortgage applications, or 0.67 percent of all mortgage applications, according to the CoreLogic analysis. By contrast, there were indications of fraud in a reported 11,100 or 0.69 percent, in the second quarter of 2014.

The CoreLogic Mortgage Fraud Report analyzes the collective level of loan application fraud risk throughout the mortgage industry. The CoreLogic Mortgage Application Fraud Risk Index is based on residential mortgage loan applications processed by a predictive fraud scoring technology, CoreLogic LoanSafe Fraud Manager. The six sub-indices that comprise the national index measure different types of mortgage application fraud, and include employment, identity, income, occupancy, property and undisclosed mortgage debt.