U.S. Mortgage Fraud on the Rise in Q2

U.S. Mortgage Fraud on the Rise in Q2

Residential News » Irvine Edition | By Michael Gerrity | October 27, 2021 8:12 AM ET

CoreLogic Reports 37.2% National Year-Over-Year Increase in Mortgage Fraud Risk

According to CoreLogic's newly released Mortgage Fraud Report, there was a 37.2% year-over-year increase in fraud risk at the end of the second quarter of 2021, as measured by the CoreLogic Mortgage Application Fraud Risk Index. The significant increase for mid-2021 follows a large drop seen in 2020 - a decrease driven mainly by the surge in traditionally low-risk refinances during the pandemic. The current risk level is similar to mid-2019.

During the second quarter of 2021, an estimated 0.83% of all mortgage applications contained fraud, about 1 in 120 applications. By comparison, in the second quarter of 2020, the estimate was 0.61% or about 1 in 164 applications. Continued low mortgage rates and a record volume of refinances pushed the overall fraud risk down. However, risk in the purchase segment increased 6%, with investment properties driving the highest risk in both purchase and refinance populations.

"Refinance opportunities that surged lending volumes during the pandemic may be winding down. The outlook is for fewer low-risk refinances compared to purchases and cash-out refinances, which translates to a higher-risk environment for fraud," said Ann Regan, executive, product management at CoreLogic.

Market Report Highlights:

  • Nationally, most fraud types showed increased risk. Transaction risk showed an increase of 34.2% year-over-year. Income and property fraud risk decreased slightly, aligning with the strong job market and home price growth.
  • The top five states for risk increases include: South Dakota, Washington, Alaska, Vermont and West Virginia. Less-populous states are more volatile due to lower levels of lending activity. These states all had below-average index values in 2020.
  • Nevada moved into the top position for mortgage application fraud risk, with New York, Hawaii, Florida, and California rounding out the top five.

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