AgentMortgage

Mortgage fraud going decreasing, but remains highest in the sunshine state

Florida's large metros dominate top 10 mortgage fraud hot spots
  • Of the six components in the CoreLogic Mortgage Application Fraud Type Indexes, only undisclosed mortgage debt risk increased.
  • As has been the case for the past five years, jumbo mortgages have exhibited the highest fraud risk, followed by low-down payment mortgages.
  • Florida metros hold half of the top ten spots on the index.

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Florida has the unfortunate distinction of leading the pack in a specific kind of fraud.

In the CoreLogic Mortgage Fraud Report released on October 15, fraud risk year-over-year dropped an overall 8.9 percent at of the end of the second quarter of 2015. In terms of numbers, for the 12 months ending the second quarter 2015, the total value of applications with fraud or serious misrepresentations was $17.3 billion, as compared with $19.8 billion a year ago.

The CoreLogic Mortgage Application Fraud Risk Index is based on residential mortgage loan applications processed by the company’s LoanSafe Fraud Manager, a predictive fraud scoring technology. The national index is composed of six sub-indices that measure different types of mortgage application fraud: employment, identity, income, occupancy, property and undisclosed mortgage debt.

Approximately 12,814 mortgage applications, or 0.67 percent of all mortgage applications made, contained hints of fraud. In the second quarter of 2014, 0.69 percent of mortgage applications, or 11,100 involved some element of fraud.

Mortgage Fraud Report

Mortgage Fraud Report

The Miami-Ft. Lauderdale-West Palm Beach core-based statistical area has the distinction of being the top metro area for fraud risk. Florida metros hold half of the top 10 spots on the index. These include:

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  • Miami-Ft. Lauderdale-West Palm Beach (1)
  • Tampa-St. Petersburg-Clearwater (2)
  • Orlando-Kissimmee-Sanford (3)
  • North Port-Sarasota-Bradenton (4)
  • Jacksonville (6)

As has been the case for the past five years, jumbo mortgages have exhibited the highest fraud risk, followed by low-down payment mortgages.

“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. Greater scrutiny, in turn, has had a positive impact on the rate of fraudulent applications,” said Susan Allen, senior vice president of Mortgage Analytics at CoreLogic, in a prepared statement.

“In the markets where fraud remains strong, there are also significant inventories of distressed properties,” she 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.”

Florida, with it’s high value homes and wealth of vacation rentals, will likely dominate the unfortunate top 10 for some time to come.

Of the six components in the CoreLogic Mortgage Application Fraud Type Indexes, only undisclosed mortgage debt risk increased. That risk rate ticked up at 1.7 percent. The largest year-over-year decline was recorded in fraudulent identity risk, at 22.7 percent.

The report also showed that the top ten states for fraud remained largely the same, with Rhode Island falling out of the top ten and being replaced by DC. The state with the highest year-over-year growth in mortgage application fraud risk was Louisiana at 17 percent; Kansas had the largest decline in the same measure at 35.2 percent.

Corelogic computes the number of expected fraudulent applications is estimated by applying the rate of applications in the CoreLogic Mortgage Fraud Consortium data with high risk of fraud to the estimated loan application volume in each quarter and geography. Expected fraudulent mortgage applications are defined as having a high risk of fraud based on the CoreLogic LoanSafe Fraud Manager score.

Email Kimberley Sirk