• A noticeable drop in mortgage fraud risk did little to impact the metro's nationwide ranking
  • The volume of undisclosed mortgage debt fraud within the metro is likely the main reason for its ranking
  • Illinois is amongst the top 10 riskiest states for application fraud

The Chicago-Naperville-Elgin metro saw a 16.3 percent year-over-year drop in mortgage fraud risk during the second quarter, along with a 6 percent quarter-over-quarter dip.

Despite these decreases, the metro is still considered a “fraud risk hotspot” and ranks as the 14th riskiest for application fraud nationally, according to a recent CoreLogic report.

“Chicago’s fraud risk index is 26 percent higher than the average for large metropolitan areas,” CoreLogic added.

CoreLogic

During the second quarter of 2014, Chicago was considered the 13th riskiest metro and experienced a 30.6 percent year-over-year rise in risk, so the market has noticeably improved during 2015. Of note, no other major metros located in the Great Lakes region made the top 25 riskiest markets list.

The state of Illinois is considered to be the no. 8 riskiest state for application fraud, slightly trailing California. Similar to Chicago’s situation, no other Great Lakes states are in the top 10.

Illinois is among the top five states when it comes to volume of undisclosed mortgage debt fraud — when a loan applicant intentionally fails to disclose additional mortgage debts during the mortgage origination process.

“In the markets where fraud remains strong, there are also significant inventories of distressed properties,” said Susan Allen, senior vice president of mortgage analytics at CoreLogic. “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.”

Email Erik Pisor.

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