Chicago Leads in Mortgage Fraud

A fourth quarter report on mortgage fraud across U.S. zip codes indicates that localized risk could pose danger of spreading throughout its metropolitan area.

The quarterly Mortgage Fraud Risk Report, released by Agoura Hills, Calif-based Interthinx, tracks overall and type-specific mortgage fraud risk, and found in its most recent data that fraud risk in Chicago’s 60621 ZIP code may have led to increased risk for the entire city.

The Chicago ZIP code, which has been the most risky for three consecutive quarters, might have driven Chicago’s overall risk from “moderate” in the second quarter to “very high risk” two quarters later, the report suggests. Illinois’ quarter-over-quarter danger rose 26 index points; the greatest gain nationally.

The report’s analysis noted that short and REO sales make up a significant share of sales in the majority of the highest-risk metropolitan statistical areas in the Occupancy and Property Valuation Fraud Risk indices, which both rose by more than 25% over the last year.

“With employment/income and identity fraud risk up by more than 25% in 2010, lenders need to be more vigilant about using fraud detection systems during refinancings, modifications, and purchase transactions that involve the resale of distressed properties,” said Kevin Coop, president of Interthinx. “In addition, short sales represent an acute risk to lenders. The large number of distressed borrowers, the lack of risk controls, and government pressure to avoid foreclosures are producing an environment that in some ways resembles the mortgage market of 2005 to 2006. Lenders and servicers who do not employ robust risk controls and analysis at every stage of the mortgage life cycle face significant financial losses.”

View the full report.

Written by Elizabeth Ecker

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