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Top States at Risk of Mortgage Application Fraud

Mortgage application fraud risk saw an 18.% year over year decrease in Q4 2019, according to the latest CoreLogic Mortgage Fraud Brief [1]. CoreLogic calls the decline part of a “a trend reversal of the declines we saw in the previous two quarters.”

CoreLogic notes that the mix of purchases and refinances is similar to last quarter, but the overall volumes decreased, and when volumes decrease, it is typical to see fraud risk increase. Purchase share was 52.2% and refinance share was 47.8%.

At the state level is now one of the top 3 states for fraud risk behind New York and Florida. Additionally, the Las Vegas-Henderson-Paradise metro had a large quarter-over quarter increase of 44%. Nevada in particular was impacted by high volumes of out-of-state investors.  In Q4, 40% of all investment applications were for people who do not live in Nevada. The national average for out-of-state investors is 22%. Nevada also had a higher rate of occupancy risk, identity issues, and high-risk sale transactions.

Syracuse, New York and Springfield, Massachusets had large increases, but as CoreLogic notes, smaller metros are prone to volatile risk rankings.

CoreLogic’s 2019 Mortgage Fraud Report pointed to declining risk levels nationwide, across all all fraud types. As of Q2 2019, CoreLogic’s Annual Report states that Undisclosed Real Estate Debt fraud risk had the greatest decrease year-over-year, followed by decreases in Property and Income fraud types

The First American Loan Application [2] Defect Index reports similar trends to CoreLogic. As of October 2019, First American’s Defect Index is 13.9% lower than October 2018 and 33.3% below its high point of risk in October 2013. The risk of defects for purchase transactions was unchanged from the prior month but is down 8.5% from 2018.

“October was also the first month since November 2018 where the 30-year, fixed mortgage rate increased month over month. Examining any potential link between defect risk trends and mortgage rates may shed light on what to expect for defect risk in the near future,” said Mark Fleming, Chief Economist at First American.