Key Highlights

  • Mortgage fraud risk increased +11.9% in Q1 2021, according to CoreLogic
  • Year-over-year trend up +7.7% from Q1 2020
  • Fraud risk levels increased +10% for purchase applications and +16% for refinance application

 Mortgage Fraud Risk Increased Substantially in Q1 2021

According to the latest CoreLogic National Application Fraud Risk Index, the risk of mortgage fraud increased +11.9% overall during Q1 2021.

The year-over-year trend for mortgage fraud rose +7.7% in Q1 2021 from Q1 2020.

Breaking it down, mortgage fraud risk increased +10% for purchase applications as the number of purchase applications grew.  Mortgage fraud risk also increased +16% for refinance applications.

There Are Six Mortgage Fraud Components

Each of the six mortgage fraud components listed here need to be fully researched and verified in order to reduce mortgage fraud risk:

  • Transaction itself
  • Identity
  • Property
  • Occupancy
  • Income
  • Undisclosed real estate debt

In today’s lightening fast housing market, real estate professionals and lenders must be meticulous about any and all discrepancies.

Highest Fraud Risk Metros

Here are the top 15 metros that saw eye-opening percentage changes in mortgage fraud risk from Q4 2020 to Q1 2021:

Metro                                Q/Q Fraud Risk Change

  1. Las Vegas/Henderson –              +25%
  2. Poughkeepsie/Newburgh –          +1%
  3. Miami/Fort Lauderdale –             +10%
  4. Tampa/St. Petersburg –              +5%
  5. Orlando/Kissimmee –                 +7%
  6. New York/Newark –                   +14%
  7. North Point/Sarasota –               +5%
  8. Cape Coral/Fort Myers –            +11%
  9. Deltona/Dayton Beach –            +7%
  10. Lakeland/Winter Haven –           +11%
  11. Los Angeles/Long Beach –          +19%
  12. McAllen/Edinburg –                    -2%
  13. Austin/Round Rock –                  +37%
  14. San Jose/Sunnyvale –                +49%
  15. Palm Bay/Melbourne –                +18%

Obviously, New York, Nevada and Florida real estate agents and loan officers need to be on their toes…and remember that deals are aren’t “done” until all the components of the transactions are verified, signed, sealed and delivered.

Forecast – Fraud Risk to Increase in 2021

CoreLogic anticipates that mortgage fraud risk will continue to rise into 2021.  CoreLogic’s thinking on this issue?  The more valuations rise due to blazing fast home price acceleration while demand continues to outpace supply, the more mortgage fraud risks will rise.

Another factor to consider here is that the new guidelines on GSE financing for investment and second homes (including the 7% cap and stricter underwriting eligibility) may “encourage” mortgage applicants to misrepresent accurate occupancy realities.

 

Thanks to CoreLogic.

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