Experts Report Warn on Rising Mortgage Fraud

Matilda Omonaiye/

 

A California-based data provider has raised the alarm over rising Fraud on U.S. mortgage applications.

According to the latest report from the Irvine, California-based data provider, CoreLogic, the mortgage applications fraud has risen to its highest level in more than seven years.

The report which details the risks to lenders, says that in the second quarter of 2018, one in every 109 mortgage applications contained an indication of fraud. That finding was up from one in every 122 applications in the same period a year earlier.

The report, which includes data from as early as 2010, also indicates that fraud has been on the rise throughout the post-crisis period.

 

Here’s the summary of the report:

2018 Annual Mortgage Fraud Report

 

The CoreLogic Annual Mortgage Fraud Report analyzes the collective level of loan application fraud risk the mortgage industry experienced from Q2 2017 to Q2 2018.

 

The annual report includes:

The number of mortgage applications estimated to have indications of fraud

The Mortgage Application Fraud Risk Index – National and Most Populous CBSAs

Analysis of Six Mortgage Fraud Components

Transaction

Identity

Property

Occupancy

Income

Undisclosed Real Estate Debt

And much more

Annual Mortgage Fraud Report

 

The CoreLogic Mortgage Fraud Brief analyzes the metro areas with the highest mortgage fraud risk on a quarterly basis and offers quarterly mortgage fraud insights based on analysis of trends found in residential mortgage loan applications processed by LoanSafe Fraud Manager.

 

The Mortgage Fraud Brief covers:

Quarterly insights based on CoreLogic analysis of mortgage applications

Highest ranking fraud risk metro areas

Quarterly Mortgage Fraud Brief

 

CoreLogic developed the index based on residential mortgage loan applications processed by CoreLogic LoanSafe Fraud Manager™, a predictive scoring technology.

 

Application Fraud Risk Index Methodology

The CoreLogic Mortgage Application Fraud Risk Index represents the collective level of fraud risk the mortgage industry is experiencing in each time period, based on the share of loan applications with a high risk of fraud. The index is standardized to a baseline of 100 for the share of high-risk loan applications nationally in the third quarter of 2010. Each 1 point change in the index represents a 1 per cent change in the share of mortgage applications having a high risk of fraud. In previous reports, the national mortgage fraud index had a static weighted average across indexes computed for various loan segments. The static weighting method ensures that the changes in loan application volume between segments with different fraud characteristics do not spuriously indicate a change in fraud risk patterns. Based on CoreLogic latest research findings, it has been deemed that the national trend is not susceptible to spurious change and the segment weighting has been adjusted quarterly to track market changes.

 

The number of expected fraudulent applications is estimated by applying the rate of applications in the CoreLogic Mortgage Fraud Consortium data with high risk of fraud to the estimated loan application volume in each quarter and geography. Expected fraudulent mortgage applications are defined as having a high risk of fraud based on the CoreLogic LoanSafe Fraud Manager score.

 

CoreLogic Mortgage Fraud Consortium data also provides the average application loan amount by quarter and geography for high-risk fraud scores based on the LoanSafe Fraud Manager score. The average loan amount for applications with a high risk of fraud combined with the number of expected fraudulent applications is used to determine the expected total fraudulent application loan amount by quarter and geography.

 

The application-fraud indexes are based on specific CoreLogic LoanSafe Fraud Manager alerts. These alerts are computed consistently across time for all CoreLogic Mortgage Fraud Consortium members, regardless of whether the client has the alerts enabled or not. Thus, increased firing of an alert indicates an increased risk of the corresponding fraud type. Because the CoreLogic Mortgage Application Fraud Risk Index is based on the LoanSafe Fraud Manager score, it provides a more comprehensive and robust indication of fraud trends that would result from simply summing the fraud type indexes.

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