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Interthinx: Jumbo Loans Present Much Higher Fraud Risk in Recent Quarter

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Wednesday, November 20, 2013

Interthinx, a leading provider of comprehensive risk mitigation solutions for the financial services industry, has released its quarterly interactive Mortgage Fraud Risk Report, covering data collected in the third quarter of 2013.

For this quarter, the national Mortgage Fraud Risk Index value is 108, a 4 percent increase from last quarter and a 10 percent increase from one year ago. Of note in this quarter's findings, the jumbo loan index values are much higher across all type-specific fraud risks. The most striking difference is seen in the employment/income fraud risk index, where the index value for jumbo loans is 146 versus a value of 69 for non-jumbo loans.

Other notable findings in the report include the following:

  • California is the riskiest state, with an index value of 151. California contains seven of the top ten metropolitan statistical areas (MSAs) for overall risk, six of the top ten MSAs for identity fraud risk, and all of the ten riskiest MSAs for employment/income fraud risk.
  • With a value of 146, the District of Columbia had the second highest mortgage fraud risk index value, surpassing all states except California. This is the first time that Washington, D.C., has been in the top two on the list since the inception of this report in the second quarter of 2009.
  • Occupancy fraud risk increased significantly, up 17 percent from last quarter to a value of 147. The jump was due to increases in occupancy fraud risk for both purchase and refinance transactions and a decline in the refinancing share of mortgage application volume. The occupancy fraud risk index is up 36 percent over last year.

The full report is available at http://www.bit.ly/1cg9lIe.

"With the rise in popularity of jumbo loans, lenders must be aware of both the credit risk and fraud risk those loans carry," said Ashley Woodworth, Interthinx vice president of business development and corporate strategy. "While the most significant fraud risk gap occurred in the area of employment/income, it certainly wasn't the only area where risk was present. Occupancy fraud risk for jumbos, for example, was extremely high - more than 200 by our index versus 150 for non-jumbo loans. The risk is out there, and lenders need to be aware."

"The numbers don't lie," said Jeff Moyer, president of Interthinx. "As we predicted last quarter, the shift toward a purchase-driven mortgage market increases the risk of fraud. Our goal in issuing this report is to make lenders aware of the fraud risk trends we've observed in the market so that they can remain vigilant in preventing those trends from becoming widespread issues within their own organizations."

The Mortgage Fraud Risk Report is an Interthinx information offering created by an internal team of fraud experts. This is the eighteenth time Interthinx has released its quarterly report. The report provides deeper insight into current fraud trends through the analysis of millions of loan applications amassed from the industry's use of the Interthinx FraudGUARD loan-level fraud detection tool.

For more information about Interthinx and its Mortgage Fraud Risk Report, visit http://www.Interthinx.com.

About Interthinx
Interthinx, a Verisk Analytics (Nasdaq:VRSK) subsidiary, provides essential solutions to mitigate risk in the mortgage and retail lending marketplace. Interthinx offers capabilities in mortgage fraud and verification, property valuation, compliance, quality control, loss mitigation, retail loan loss forecasting, and capital planning that are used by the nation's top financial institutions. Interthinx helps its clients minimize risk, increase operational efficiencies, satisfy regulator demands, manage data verification, and remain compliant. For more information, visit www.interthinx.com or call 1-800-333-4510.

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