The New York Tri-State area is seeing higher levels of fraud in property valuation, prompting analytics firm Interthinx to classify the area as "very high risk" when it comes to its overall mortgage fraud.

The Agoura Hills, Calif.-based subsidiary of Verisk Analytics said the New York, New Jersey, Connecticut area faces higher levels of fraud from property valuations.

Overall, the property valuation fraud risk index produced by Interthinx rose 8% in the fourth quarter from the third quarter. The entire mortgage fraud index increased 1.4% from the prior quarter and 3.6% from the year-ago fourth quarter.  

"Valuation fraud continues to be a problem for lenders intent on mitigating overall fraud risk," said Mark Chapin, chief valuation officer for Interthinx.

"Lenders must take great care with their collateral valuation process in this environment, as many areas around the country are still experiencing home value declines. Technology — linked with the honed skills of qualified appraisers — produces the most credible results in our constantly moving marketplace," Chapin said.

In addition, the income-employment fraud risk index for the fourth quarter rose 1% from the three months ended Sept. 30 and 14% from a year earlier.

Interthinx said Arizona is now the nation's riskiest mortgage market for instances of fraud, jumping past Nevada, which previously held the top spot.

A number of regions in the New York area, including Bridgeport and New Haven, Conn., and Atlantic City and Ocean City, N.J., have moved into the "very high risk" category. The increase in these areas is driven primarily by upswings in fraud during the property valuation.