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Study: Wichita has the Highest Mortgage Fraud Risk

Mortgage application fraud appears to be on the rise, with six consecutive increases in the CoreLogic [1] National Mortgage Application Fraud Risk Index. The latest fraud index [2] was up 10 percent from a year ago and posted a 4 percent increase from fourth quarter of 2017 to the first quarter of 2018.

CoreLogic noted that the rise in the index can be at least partly attributed to the increasing share of purchase applications as refinance volumes decrease. Generally, purchase applications carry greater fraud risk than refinance applications, according to CoreLogic.

The types of fraud CoreLogic described as most prevalent were “more frequent inflated income characteristics” and “multiple indicators of increased risk of occupancy misrepresentation.” In terms of occupancy misrepresentation, CoreLogic noted the trend was the “type where loan applicants seek to build rental portfolios under the more favorable lending terms offered to owner-occupants.”

The share of purchase applications rose from 58 percent in the fourth quarter of 2017 to 62 percent in the first quarter of this year.

Among the 100 largest core-based statistical areas, Wichita, Kansas, ranked highest for mortgage application fraud risk, jumping to the No. 1 spot with a 46 percent quarter-over-quarter rise in fraud risk.

CoreLogic’s index scores are grounded on a standard score of 100 based on the national share of loans with high fraud risk in the third quarter of 2010. Each 1 point variance from 100 signifies a 1 percent increase or decrease in the share of loans with high fraud risk, according to CoreLogic.

Leading the nation in fraud risk, Wichita’s index rating in the first quarter was 330, which was 50 points higher than its successor, Miami-Fort Lauderdale-West Palm Beach, Florida, with a score of 280.

These two metros were followed by New York-Newark-Jersey City, New York-New Jersey-Pennsylvania (261); Springfield, Massachusetts (258); and Oklahoma City, Oklahoma (254).

These compare to a national index score of 144. Fourteen of the 15 riskiest metros experienced rising risk index levels in the first quarter of the year.