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Report: More Mortgage Fraud Arising From Collusion

Mortgage origination fraud may be on the decline, but incidences of collusion appear to be trending up, according to a report released Wednesday by ""LexisNexis Risk Solutions."":http://www.lexisnexis.com/en-us/home.page

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After noticing a rising trend in collusion, LexisNexis created a new index specifically to measure incidences of collusion.

Collusion has been on the rise since 2009, according to ""Tim Coyle"":http://www.linkedin.com/pub/dir/Tim/Coyle, senior director of real estate and mortgage solutions at LexisNexis. He noted during a conference call that prior to 2009, collusion reports remained just below 5 percent. By 2010, the rate had almost doubled.

While the rate declined again in 2011, it remained above historic levels at 6.8 percent.

""Increased levels of fraud and misrepresentation in the foreclosure, short sale, and real estate-owned worlds have pushed the issue of collusion to the forefront,"" said ""Tom Brown"":http://www.linkedin.com/pub/thomas-c-brown/7/472/499, SVP of financial services at LexisNexis, in a press release.

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""Now, more than ever before, these complex schemes are coming under increased scrutiny and investigators need to pay attention to all parties and relationships in non-arm's length transactions,"" Brown continued.

According to the new collusion index, among properties with 20 percent to 95 percent price depreciation, Alabama ranked highest for collusion in 2011. The Southern state was followed by New York, Kentucky, Pennsylvania, and Indiana.

LexisNexis also observed collusion reports on properties experiencing 50 percent to 95 percent price depreciation. In this category, Vermont ranked first, followed by West Virginia, Alabama, Pennsylvania, and Louisiana.

In its traditional mortgage fraud index, LexisNexis found Florida ranked highest for mortgage fraud investigations. Nevada, Arizona, Michigan, and Rhode Island rounded out the top five.

Fraud reports specific to originations were highest in New Jersey, Colorado, Florida, Michigan, and California.

When measuring mortgage fraud reports in metropolitan statistical areas (MSAs), LexisNexis found that 46 percent of reports came from just five MSAs.

Those MSAs include Los Angeles-Riverside-Orange County with 16 percent of all reports, New York-Northern New Jersey-Long Island with 11 percent, and Miami-Fort-Lauderdale with 7 percent.

LexisNexis measures fraud as reported by industry participants. The fraud must be verified and must be substantial to be counted. The index does not include fraud perpetrated by borrowers.

About Author: Krista Franks Brock

Krista Franks Brock is a professional writer and editor who has covered the mortgage banking and default servicing sectors since 2011. Previously, she served as managing editor of DS News and Southern Distinction, a regional lifestyle publication. Her work has appeared in a variety of print and online publications, including Consumers Digest, Dallas Style and Design, DS News and DSNews.com, MReport and theMReport.com. She holds degrees in journalism and art from the University of Georgia.
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