Fraud risk in the mortgage industry surged more than 11% from Q209 to Q309, according to a mortgage fraud risk index compiled by Agoura Hills, Calif.-based mortgage software developer Interthinx. The index comprises several common types of mortgage fraud. The Property Valuation Fraud Risk Index is up 25% from the previous quarter and up 46% from the year-ago quarter, indicating a shift toward fraudulent schemes involving short sales, real estate-owned inventories and refinancings by borrowers with equity impaired by falling property values. The Occupancy Fraud Risk Index, on the other hand, dropped 30% from the year-ago quarter as financial pressure and a depressed real estate market for investment and rental properties cut down on opportunities for schemes involving speculative investments, according to Interthinx. The Employment/Income Fraud Risk Index fell by 2% from Q209 and by 35% from the year-ago quarter, a decline Interthinx attributed to lenders' increased use of Intternal Revenue Service (IRS) data to verify income. Affordability is also on the rise, meaning the need for misrepresentation of income to qualify for purchases is diminishing. The geographic instance of mortgage fraud risk spread since the previous quarter, with many metropolitan statistical areas (MSAs) moving into a higher risk category. The Stockton, Calif. MSA experienced the highest mortgage fraud risk index in the quarter, rising 68.1% over the level seen there a year earlier. Several Florida MSAs, one Nevada MSA and a handful of other California MSAs rounded out the top ten MSAs in terms of their risk level. Write to Diana Golobay.