Incidents of mortgage-related fraud involving misrepresentations in income and employment are on the rise, according to the annual Interthinx Mortgage Fraud Risk report.

Interthinx, an analytics firm that studies loan fraud, noted Wednesday that the employment/income fraud index rose 14% in the year 2011, continuing a trend that has been ongoing for two years.

As in the year before, the top six states with the highest overall levels of mortgage fraud risk in 2010 were again the riskiest six states in 2011.

The state of Nevada continues to rank highest for mortgage-related fraud risk, with the state battling many foreclosure and short-sale fraud schemes. Nevada is particularly at risk because it experienced a boom-bust real estate cycle, leaving the state littered with distressed properties and troubled homeowners, according to the fraud analytics firm.

The following five states, in order of highest fraud risk are: Arizona, Florida, California, Colorado and Michigan.

Meanwhile, the Chicago metropolitan statistical area noticed a dramatic decline in high-risk transactions in 2011 as its risk index value fell from 174 in the first quarter to 146 in 4Q. Interthinx believes media attention and the scrutiny of lenders in the Chicago area helped reduce incidents of fraud.

"Keeping our guard up as risk profiles shift requires our industry to think as creatively as the criminals," said Kevin Coop, president of Interthinx."That’s only possible when lenders have access to the best data and analytics available."

Also notable, Rhode Island, Massachusetts, and New Hampshire are among the four states with the largest risk decreases, while Vermont and Connecticut both experienced large increases in fraud risk.

kpanchuk@housingwire.com