(11/24/2010) Mortgage fraud is on the rise, up 20 percent since the lowest rates in
2009.
A new report by CoreLogic says lenders are reporting increased levels of
fraud as the come-on artists migrate toward higher risk, high volume loan
programs, including those offered by the Fair Housing Administration (FHA),
Home Affordable Refinance Program (HARP) and short sales and real estate
owned (REO) sales.
The mortgage industry had taken steps to curb fraud arising from
opportunities for miscreants created by the easy-money era of the housing
boom.
But a new wave of fraud is cashing on opportunities created by hard
times.
"Despite increased fraud activity during 2010, the industry has made
substantial progress in curbing fraud from the levels it reached
during the height of the market in 2007. Fraud continues to shift to areas
of the lending business where large volume increases occur over short
periods of time, or where advanced risk mitigation processes are not
squarely in place," said Tim Grace, senior vice president of Fraud Solutions
at CoreLogic.
"In fact, during the seven quarters CoreLogic analyzed for this update,
fraud risk associated with refinancing grew
approximately 30 percent. We also found that REO sales pose a greater risk
than short sales, with one in every 24 REO sale transactions associated with
a fraudulent resale," Grace added.
CoreLogic used predictive analytics to analyze and issue a fraud score
for each of the seven million loans issued from the first quarter of 2005
through the second quarter of 2010.
The peak of mortgage fraud activity was in 2006, at a fraud rate of
109. The data showed fraud reached its lowest point in early 2009 at a fraud
rate of 68, but as of the second quarter of 2010, it has increased 20
percent to a fraud rate of 82.
Still well below the peak, mortgage fraud is growing.
CoreLogic found:
• Increased lending through FHA and HARP loan programs accounted for
most of the increased risk in 2009 and 2010.
• Second quarter of 2010 had the highest volume of single family
resident short sales with nearly 60,000 short-sale transactions.
• REO transaction volume is more than twice that of short sales with
120,000 REO sales in the second quarter of 2010.
• Investment companies are involved in a
disproportionately higher percentage of suspicious resales.
• Flipping and flopping hot spots in the U.S. are Southern
California, Phoenix, Detroit and Atlanta.
• Lenders have reported that occupancy fraud, employment fraud and
undisclosed debt are on the rise.
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