Q3 Mortgage Fraud Risk Declines Slightly

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The national mortgage application fraud risk index dropped from 113 in the second quarter of 2016 to 108 in the third quarter, according to researchers at CoreLogic. The first quarter’s index score was also 113.

Increased activity in the refinance market was the primary driver of the third-quarter drop. Home refinancing loans typically have lower levels of application fraud risk.

CoreLogic’s mortgage fraud risk index is standardized to a baseline of 100 for the share of high-risk loan applications nationally in the third quarter of 2010. Each one-point change in the index represents a 1% change in the share of mortgage applications having a high risk of fraud.

The 10 metro areas with the highest mortgage fraud risk are:

  1. Miami-Fort Lauderdale-West Palm Beach, Florida: 242
  2. Deltona-Daytona Beach-Ormond, Florida: 213
  3. New York-Newark-Jersey City, New York/New Jersey: 208
  4. Tampa-St. Petersburg-Clearwater, Florida: 201
  5. El Paso, Texas: 178
  6. Springfield, Massachusetts: 177
  7. Jacksonville, Florida: 169
  8. Lakeland-Winter Haven, Florida: 168
  9. Buffalo-Cheektowaga-Niagara Falls, New York: 167
  10. Las Vegas-Henderson-Paradise, Nevada: 160

Mortgage fraud can take many forms. The basic motive behind most of the borrower-initiated fraud is an attempt to qualify for a mortgage that would otherwise be unavailable. Inflating an appraisal in an attempt to get a mortgage for more than a property is worth or claiming income or assets that a borrower does not have are just two examples.

Borrowers themselves may also be the target of scams seeking to defraud them with loan modification programs or even Ponzi schemes. Promise to rescue a borrower from a foreclosure can leave a beleaguered homeowner in even worse financial shape.

The CoreLogic Mortgage Fraud Report analyzes the collective level of loan application fraud risk the mortgage industry is experiencing each quarter. CoreLogic develops the index based on residential mortgage loan applications processed by CoreLogic LoanSafe Fraud Manager, a predictive scoring technology. The report includes detailed data for six fraud type indicators that complement the national index: identity, income, occupancy, property, transaction and undisclosed real estate debt.