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Fraud: How are Mortgages at Risk?

Untitled design-4CoreLogic Senior Director of Fraud Solutions Strategy Bridget Berg recently took a look at the overall fraud risk outlook for 2017.

Based on CoreLogic’s information, fraud risk increased by about 17 percent year-over-year and is now at its highest level since 2010.

“Keep in mind, however, that in historical terms, fraud, overall, is still relatively low, given the tighter underwriting since the mortgage crisis, and the amount of rate and term refis over the past few years,” said Berg.

However, in 2017, despite the decrease in application volumes, the total number of applications with fraud is higher than last year, in fact, CoreLogic discovered 13,404 applications with indications of fraud in Q2 2017 alone.

Berg said there are two main drivers of fraud risk increases this past year, including a continued increase in purchase transaction share from 55 percent of applications to 66 percent over the last year. The other factor is originations coming through wholesale channels, as these loans have a “historically exhibited a higher risk of fraud.”

According to Berg, there are three types of mortgage fraud on the rise for 2017. First, occupancy fraud risk has increased by 7 percent, which includes traditional occupancy risk and reverses occupancy risk. Second, transaction fraud risk, covering straw buyers and falsified down payments, has increased about 4 percent. The third type of risk is income fraud risk, which increased 3.5 percent, with “most of the increase happening in the first half of this year.”

Regionally, the top three states that are at risk for mortgage fraud are New York, New Jersey, and Florida. However, the states showing the greatest growth rate in fraud are lower-risk states in the middle of the country including, Iowa, Indiana, and Missouri.

Berg notes that for the future, CoreLogic will be monitoring cash-out refinances and home equity loans, as rising home prices and homeowner equity, they are forecasted to become prevalent. The fraud risk on these products is higher than it is for rate and term refinances, so Berg said this is another area to watch over time.

View the full report by clicking here.

About Author: Nicole Casperson

Nicole Casperson is the Associate Editor of DS News and MReport. She graduated from Texas Tech University where she received her M.A. in Mass Communications and her B.A. in Journalism. Casperson previously worked as a graduate teaching instructor at Texas Tech's College of Media and Communications. To contact Casperson, e-mail: nicole.casperson@thefivestar.com.

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