The Irvine, Calif.-based analytic provider’s Mortgage Fraud Report showed that fraud risk among U.S. mortgage applications declined 5.6% in the second quarter of 2013 from a year ago. The index has seen a year-over-year decline for five straight quarters.
The data indicate that approximately 19,700 or 0.8% of mortgage applications in 2Q13 were identified as having a high risk of fraud. This is down from last year when 20,900, or 0.7%, were labeled with this characteristic.
In the second quarter of 2013, fraudulent residential mortgage loan applications totaled an estimated $5.3 billion, down from $5.5 billion experienced during the prior quarter.
CoreLogic also noted a decrease of 0.73% on a quarter-over-quarter basis in 2Q13.
Since the index peaked in the first quarter of 2012, mortgage application fraud risk has fallen 6.8%.
“Since the beginning of 2012, mortgage application fraud risk has totaled more than $30 billion nationally,” said Mark Fleming, chief economist for CoreLogic. “While the propensity toward application fraud risk has declined based on our index, as the housing market recovers, the volume of mortgage applications is rising and increasing the total amount of fraudulent mortgage loan application dollars.”
Nationally, Ohio experienced the highest year-over-year growth in mortgage application fraud risk, up 30.1%. Other states that saw a large uptick in loan applications with inaccurate information were Hawaii (up 19.6%), Kentucky (16.6%), Connecticut (15%) and Alaska (13.8%).
Conversely, there was a 29% decline on an annual basis in Washington, D.C., where mortgage applications were deemed to have fraudulent data. A significant drop-off in application fraud risk was also seen in Nevada (down 23.1%), Idaho (22.3%), Delaware (22%) and Oregon (18.5%).
Overall, the total dollars of fraudulent mortgage loan applications increased in 27 states on a quarterly basis.
The five states with the highest estimated value of fraudulent mortgage applications were California at $864 million, followed by New York at $278 million, Florida was $273 million, Texas at $261 million and Virginia was $231 million.
Through the first half of 2013, fraudulent loan applications reached a value of about $10.5 billion. Meanwhile, over the last year, there has been about $21.9 billion of residential mortgage loans with fraudulent information, CoreLogic said.
The CoreLogic Mortgage Application Fraud Risk Index is composed of six measures of fraud risk: employment, identity, income, occupancy, property and undisclosed debt.
Fleming said that over the last 18 months as the housing market and economy have recovered, a transition has taken place from property-related and identity-related application fraud to income application fraud.
Income application fraud is an intentional misrepresentation of how much a borrower makes. This index rose 13.3% nationally in 2Q13 from a year ago. Additionally, the index was up 7.5% quarter-over-quarter.
On the other hand, property application risk has fallen 20.8% from the same time period last year and is down 7.1% from the first quarter. Property application fraud intentionally misrepresents a property’s value as either higher or lower than market value to achieve illegitimate gains.
Identity fraud risk has dropped 14.5% year-over-year and 3.2% on a quarterly basis. Identity application fraud occurs when an identity is altered, created or stolen to obtain a mortgage.
“Rising prices and a healing housing market make property-related mortgage application fraud less likely, but a higher level of scrutiny on an applicant’s ability to pay increases the propensity to attempt income-related fraud,” Fleming added.