Occupancy fraud was the most common type of mortgage fraud reported during the first half of 2005, according to statistics released by a fraud insurance company last week.

More than half – about 53 percent – of claims filed with the Novato, Calif.-based The Prieston Group contained some type of occupancy misrepresentation, the company said.

“Occupancy fraud” occurs when borrowers – or someone acting on behalf of borrowers – misrepresents whether they plan to live at the property, the company, which helps lenders protect themselves against mortgage fraud, said.

Mortgage fraud is on the upswing, with the number of suspicious activity reports to the Federal Bureau of Investigation in 2004 almost triple those in 2003, according to a report by the FBI released in May.

States are taking action to counter this trend, with Georgia’s new Residential Mortgage Fraud Act having been signed into law May 5 by Georgia Gov. Sonny Perdue. The Act defines the criminal offense of residential mortgage fraud.

Following behind occupancy fraud were schemes involving hidden debt (found in 31.6 percent of all claims), employment fraud (found in 30.3 percent of all claims) and straw borrowers (found in 12.9 percent of all claims), the group said.

“Although occupancy fraud was the most commonly reported type of fraud during the first half of this year, we often find that claims contain multiple types of fraud and involve multiple people,” said The Prieston Group Chairman Arthur Prieston.

“Recognizing all the fraud in a particular file is essential in identifying fraud schemes,” Prieston said.

Occupancy fraud was the No. 1 type of fraud reported in four of the top five mortgage fraud hot-spot states, the company said.

In Georgia, which led the list in number of claims filed during the first half of the year, occupancy fraud was found in 48 percent of the files, the company said. The average FICO score of claims filed in Georgia was 633 and the average loan-to-value ratio was 86 percent, according to the group.

That compares with an average FICO score of 628 on all claims filed from across the country during the first six months of 2005. The average loan-to-value ratio on all loans was 81.7percent. Full-documentation loans accounted for 55.5 percent of claims filed, which mirrors general industry trends, the group said.

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