An updated CoreLogic Mortgage Fraud Trends Report finds that while overall mortgage fraud has increased by 20% since fraud hit its lowest level in 2009, refinance fraud saw an even higher increase of 30%.
According to CoreLogic, recent government loan programs have not had a sizable impact on fraud because “many of them lacked necessary fraud controls.” Consequently most of the fraud increase was attributed to FHA loans, Home Affordable Refinance Program loans, real estate owned or foreclosure and short sales.
Findings based on the CoreLogic database that covers 97% of the nation’s real estate transactions deriving from 80 million loans that represent 65% of the origination market also show the last seven quarters of purchase-related fraud risk “has remained stable” during that same time period.
CoreLogic also reports that currently the “growing area of suspicious activity” has been in REO sales, which “represent a larger risk to the mortgage industry than short sales.”
By November 2010 one in every 24 REO sale transactions, or 4.2% were part of an “egregious resale and therefore deemed risky.” That is way higher than the 1% fraud risk that is considered the acceptable fraud rate.
Another emerging trend according to CoreLogic analysts is the fact that more investment companies are getting involved in fraud as “a disproportionately higher percentage of suspicious resales” are conducted by these entities.
Other changes include changes in the fraud type distribution. This includes decreases in income fraud, mostly due to more careful verifications and the use of sophisticated technology. At the same time undisclosed debt and employment fraud are now “the fastest growing segments” and the type of fraud risk lender-servicers will have to closely monitor going forward.
To make that endeavor possible, CoreLogic said it has added a neighborhood level fraud risk measure to its fraud metrics in addition to its national, state, MSA, and SCF segments.
