An increase in property valuation fraud has moved several regions in the New York area into the “very high risk” category, according to the latest mortgage fraud risk report from Interthinx.
The Agoura Hills, Calif.-based analytic firm said Manhattan, Bridgeport, Conn., New Haven, Conn., Atlantic City, N.J., and Ocean City, N.J. all moved into this higher category through the end of the fourth quarter of 2011. Interthinx said the spread of risk over these geographic areas exemplifies the value of aggregated loan application data in identifying hot spots and determining tactical action to contain the expansion of risk.
After a period of decline and stability, property valuation fraud risk increased approximately 8% in the fourth quarter compared to the third quarter. Property valuation fraud is perpetrated by manipulating a home’s value to create false equity, which is then extracted from loan proceeds by various means.
“Valuation fraud continues to be a problem for lenders intent on mitigating overall fraud risk,” said Mark Chapin, chief valuation officer for Interthinx. “Lenders must take great care with their collateral valuation process in this environment, as many areas around the country are still experiencing home value declines. Technology—linked with the honed skills of qualified appraisers—produces the most credible results in our constantly moving marketplace.”
Interthinx’s overall mortgage fraud risk index was up 1.4% from the previous quarter and was higher year-over-year by 3.6%. The reason for this increase was because more Metropolitan Statistical Areas are now categorized as a “very high risk” city, Interthinx said.
California, Florida, Arizona, Colorado and Nevada have several MSAs in the very high category. Stockton, Calif. continues to be the highest mortgage fraud risk area, while five other Golden State cities are ranked within the top ten riskiest markets nationwide for fraudulent activity.
Other notable MSAs classified as very high risk cities are Atlanta, Cleveland, the Tennessee metros of Memphis and Chattanooga, Charleston and Myrtle Beach, S.C., Flint, Mich. and Burlington, Vt.
According to Interthinx, Arizona surpassed Nevada as the most risky state. Nevada had held the top spot since the first quarter of 2010.
Florida is the third most risky state because it contains the zip code (33993) that has the greatest fraud risk in the nation as well as the three highest Metropolitan Statistical Areas for occupancy fraud risk—Palm Bay, Miami and Cape Coral—and Miami has the most identity fraud risk.
