Fraud Risk Declines 11 Percent, CoreLogic Reports

July 23, 2019

Fraud risk declined more than 11 percent over the past year, according to the latest CoreLogic National Mortgage Application Fraud Risk Index.

New York, New Jersey, and Florida remain the top three states for mortgage application fraud risk, maintaining the same positions as last year. All the top 10 states showed increases in risk year-over-year.

The states with the greatest year-over-year growth in risk include New Mexico, Mississippi, Illinois, Oklahoma, and Texas. Of these, New Mexico, Illinois and Oklahoma now have risk levels greater than the National Index, which grew from 133 to 149 year-over-year.

The Conforming LTV≤80 purchase segment shows the greatest risk increase by loan type.

Income fraud risk had the greatest increase year-over-year, followed by occupancy and transaction fraud. Property and undisclosed real estate debt showed declines in risk.

According CoreLogic, the continued shift from a refinance-heavy market to a predominantly purchase market is a key factor in the application fraud risk increase. From Q2 2017 to Q2 2018, the proportion of purchase transactions within the consortium increased from 66 percent to 72 percent of applications, the report showed. While the shift from refinance to purchase transactions is still forecast to continue, it may be nearing its maximum. Purchase transactions have shown a higher risk profile than refinances due to the stronger motivations to commit fraud.

“This year’s trend continues to show an increase in mortgage fraud risk year-over-year,” said Bridget Berg, principal of CoreLogic’s fraud solutions strategy. “Because home prices are rising and demand for homes is strong, most mortgage fraud in this type of market is motivated by bona fide borrowers trying to qualify for a mortgage. Undisclosed real estate liabilities, credit repair, questionable down payment sources, and income falsification are the most likely misrepresentations.”

National Mortgage Fraud Types

  • Income Fraud Risk: Up 22.1 percent (Q2 2018 versus Q2 2017)
  • Occupancy Fraud Risk: Up 3.5 percent (Q2 2018 versus Q2 2017)
  • Transaction Fraud Risk: Up .6 percent (Q2 2018 versus Q2 2017)
  • Property Fraud Risk: Down .1 percent (Q2 2018 versus Q2 2017)
  • Undisclosed Real Estate Debt Fraud: Down 11.4 percent (Q2 2018 versus Q2 2017)

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