New CoreLogic study to analyze possible fraud exposure in FHA loans
CoreLogic (CLGX) plans to conduct a new study to measure data on possible fraud exposure within Federal Housing Administration loans. At the analytics firm's mortgage fraud consortium meeting last week, members discussed a process dubbed “FHA flipping,” and decided to initiate the study, according to a company spokeswoman. The members want to see if the home valuation code of conduct that FHA products must comply with inordinately increases the exposure the loans have to certain types of fraud. A spokeswoman for CoreLogic said lenders want to evaluate the rates of fraud on loans that require separation between broker and appraiser. "FHA loans are attractive to fraudulent parties because of their low down-payment requirements," the spokeswoman said. "The FHA flipping scheme involves fraudsters recruiting young, recent college graduates applying for an FHA loan to act as 'strawbuyers' of a property. Because qualifying for a loan as a first-time borrower is comparatively easy under FHA, criminals have an easier time securing the property, and do so with little or no upfront investment." The code of conduct requires lenders, not brokers, select property appraisers. And properties purchased with FHA loans can be sold prior to the 90-day wait conventional purchases must abide. Results of the new study are expected next year. Write to Jason Philyaw.