The entire Chicago metropolitan area is at a very high risk of mortgage fraud, as localized risk is spreading rapidly. Chicago zip code 60621 remains the riskiest area in the nation, according to a quarterly mortgage fraud report from Interthinx. This trend is driving the Chicago area up from a “moderate risk” zone to “very high risk.” In addition, the Illinois fraud index jumped 26 points in the fourth quarter, the biggest increase of any state. Interthinx reported the risk index for the fourth quarter of 2010 at 140, down 2.8% from the third quarter and 3% from the same time last year. The index is calculated based on the frequency that indicators of fraudulent activity, such as property misvaluation, employment misrepresentation or concurrent closing schemes, are detected in mortgage applications processed by Interthinx. A value of 100 on any given index represents the normal level of fraud risk. Chicago is 568. Glendale, Arizona is next at 547. Nevada and Arizona, at the state level, continue to have the highest exposure to risk at indices of 255 and 210, respectively. Florida came in at 181, followed by California at 180. California contains six of the top 10 most risky MSAs, according to Interthinx. The states with the lowest mortgage fraud risk indices are, in descending order, Montana, Wyoming, West Virginia, Mississippi and Kansas. The five lowest ranking states have an index less than half the national average. (Click on chart to expand.) Interthinx tracks four type-specific fraud risk indices. The identity fraud and employment/income fraud risk indices both spiked at the end of 2010 compared to a year ago, up 27% and 28%, respectively. The identity fraud increased to 190 in the fourth quarter, up 0.4% from the third quarter. The Cleveland metropolitan statistical area topped out the index at 606, a 53.5% increase from last quarter and a 260.9% increase from last year. Trenton-Ewing, N.J.; Akron, Ohio; Fayetteville-Springdale-Rogers, Ark.-Mo. and New York et al, N.Y.-N.J.-Pa. rounded out the five MSAs with the most identity fraud. The employment/income fraud risk index increased to 101, up 7.5% from the preceding quarter and up 28.1% from a year prior. The Burlington-South Burlington, Vt. metro area came in first on the index at 221. That number is up 42.6% from the previous quarter and up 187.1% from the same period last year. The Property Valuation Index as well as the Occupancy Fraud Index declined both on a quarterly basis and on an annual basis. Property Valuation fraud risk, which aims at incorrectly valuing home equity, dropped to a 254 index, while Occupancy fraud risk dropped to an index of 64. This type of fraud is a favored vehicle of professional real estate investors who falsely claim the intent to occupy the purchased property to obtain lower interest rates or down payments on a mortgage. Write to Christine Ricciardi. Follow her on Twitter @HWnewbieCR.