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Report: Arizona Is Scene of Rising Home Loan Fraud

There has been somewhat of a shift in the states that have the greatest mortgage fraud problems, according to a periodic report from the National Home Equity Mortgage Association and the Mortgage Asset Research Institute that concentrates on issues in the nonprime lending sector.

Notably, NHEMA said, "When fraud reports are broken out for [nonprime] lending, the state indices show South Carolina falls significantly in its fraud ranking."

Arizona, meanwhile, "appears to have growing problems," the association said.

NHEMA also noted that "serious early defaults are a leading indicator of mortgage fraud, and [nonprime] loans from the 2004 book of business in Oklahoma, Mississippi and Ohio are showing these defaults at more than twice the national average."

The report, which also tracks trends in the prime sector, also found that "prime loan concerns continue to rise in the Midwest, and cities of moderate size appear to have particular problems with recent originations that become seriously delinquent."

Other general fraud trends noted in the study include:

* For the second year in a row, Georgia has the highest rate of reported fraud during the prior four-year period.

* Florida continues to have a high fraud score, but is no longer entrenched in its historical second-place position on the national list of hot spots.

* Reported fraud in California has dropped significantly, but many of its problems are likely being masked by high real estate appreciation.

* The types of problems found in loan fraud files seem to have been relatively stable throughout the last four years.

NHEMA has an agreement with the Mortgage Asset Research Institute to produce the report on an annual basis using information in MARI's Mortgage Industry Data Exchange, according to NHEMA president Jeffrey Zeltzer.

"Our members are dedicated to rooting out fraudulent practices in the lending industry so that consumers reap the benefits in the form of a cleaner and fairer financial transaction," he told attendees at the NHEMA Fraud Prevention and Detection Conference held here on May 24 and 25. "We believe our members and all other lenders will benefit by studying this report produced from incidents of mortgage fraud submitted to MARI's cooperative database system."

MIDEX provides its users both public and nonpublic reports about incidents of mortgage fraud or misrepresentation in loans associated with brokers or other mortgage professionals. MIDEX subscribers contribute nonpublic reports describing cases of fraud, misrepresentation or serious misconduct they uncover in their quality control reviews. In return, they are able to check the nonpublic reports contributed by other subscribers.

"We are pleased to be working closely with NHEMA members and staff," said Bill Matthews, a MARI executive and lead author of the report.

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