As of the end of the second quarter of 2015, CoreLogic reports an 8.9% year-over-year decrease in fraud risk, as measured by the Mortgage Application Fraud Risk Index.
For the twelve months ending the second quarter 2015, the report estimates the total value of applications with fraud or serious misrepresentations at $17.3 billion, as compared with $19.8 billion a year ago.
The analysis found that during the second quarter of 2015, approximately 12,814 mortgage applications, or 0.67% of all mortgage applications, contained indications of fraud, as compared with the reported 11,100 or 0.69% in the second quarter of 2014.
“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 the markets where fraud remains strong, there are also significant inventories of distressed properties. 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.”
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The CoreLogic Mortgage Fraud Report analyzes the collective level of loan application fraud risk throughout the mortgage industry. The CoreLogic Mortgage Application Fraud Risk Index is based on residential mortgage loan applications processed by CoreLogic 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.
Among the highlights of the report:
- The 10-highest risk states in terms of mortgage fraud as measured by CoreLogic remained mostly stable.
- Florida maintained its position as the nation’s highest-risk state.
- New York moved up to No. 2 from No. 3 in 2014.
- Rhode Island fell out of the top 10, being replaced by the District of Columbia.
The state with the highest year-over-year growth in mortgage application fraud risk was Louisiana at 17%; Kansas had the largest decline at 35.2%.
Of the six components in the CoreLogic Mortgage Application Fraud Type Indexes, undisclosed mortgage debt risk showed the only increase at 1.7%; identity risk had the largest year-over-year decline at 22.7%.
As has been the case for the past five years, jumbo mortgages have exhibited the highest fraud risk, followed by low-down payment mortgages.