Mortgage Market Rebound Attracts Greater Fraud Risk

August 21, 2013 / 4 min read

Adjustable-rate mortgages carry significantly higher risk than fixed-rate mortgages

AGOURA HILLS, CALIF., August 21, 2013 — Interthinx, a leading provider of comprehensive risk mitigation solutions for the financial services industry, has released its quarterly interactive Mortgage Fraud Risk Report, covering data collected in the second quarter of 2013.

Overall, the national Mortgage Fraud Risk Index value is 104 this quarter, a 4 percent increase from both last quarter and from one year ago. Among the four fraud categories indexed nationally, identity fraud risk is at 91, up 7 percent since last quarter; property valuation fraud risk is at 105, a 4 percent drop from last quarter; occupancy fraud risk is at 126, up 10 percent from last quarter and up 14 percent from one year ago; and employment/income fraud risk is at 92, a 2 percent increase from last quarter.

Other notable findings in the report include the following:

With housing prices and interest rates rising, it is likely that demand for adjustable-rate mortgages (ARMs), which still have rates below 3 percent, will increase. For all fraud risk types, index values are much higher in adjustable-rate mortgages than in fixed-rate mortgages.
Nevada displaced California as the riskiest state, with a Mortgage Fraud Risk Index value of 132, a jump of 7 percent from last quarter. California is the second riskiest state with an index value of 130, a 4 percent climb from last quarter. The District of Columbia and Florida are in third and fourth places, respectively, with index values of 128 and 117.
Although California is the second riskiest state overall, it contains four of the top ten — and ten of the top 25 — riskiest ZIP codes, six of the overall riskiest metropolitan statistical areas (MSAs), five of the riskiest MSAs for identity fraud risk, and all ten of the top ten MSAs for employment/income fraud risk.
The national index for identity fraud risk is 91, up 7 percent since last quarter. The riskiest MSA for identity fraud risk is Fayetteville-Springdale-Rogers Arkansas-Missouri, up 19 percent from last quarter at 174.
Florida has six of the top ten riskiest MSAs for occupancy fraud risk, including first-place Cape Coral-Fort Myers, up 29 percent this quarter with an index value of 267. Nationally, this index is up 10 percent from last quarter and up 14 percent from one year ago.

“Mortgage fraud is a hallmark indicator of other trends,” said Ashley Woodworth, Interthinx vice president of business development and corporate strategy. “For example, traditional fraud hotspots in California, Nevada, and Florida were hardest hit by high rates of default, foreclosure, and underwater borrowers because of widespread fraud in loan originations during last decade”s boom. Furthermore, the dynamic rebound of markets where housing prices are rising shows a corresponding increase in fraud risk. While the market rebound is welcome, this report reminds us that fraud is much easier to commit in a rising market.”

“Our industry has turned the corner as indicated by sustained increases in value, the upward trajectory of interest rates, and a shift toward a purchase market — all positive trends that ironically carry their own set of fraud risks,” added Jeff Moyer, president of Interthinx. “Interthinx tracks fraud nationally and by state, MSA, and ZIP code across distinct categories, allowing mortgage lenders, servicers, and investors to develop risk management strategies that work hand in glove with their other quality control initiatives.”

The Mortgage Fraud Risk Report is an Interthinx information offering created by an internal team of fraud experts. This is the seventeenth time Interthinx has released its quarterly report. The report provides deeper insight into current fraud trends through the analysis of millions of loan applications amassed from the industry”s use of the Interthinx FraudGUARD® loan-level fraud detection tool.

For more information about Interthinx and its Mortgage Fraud Risk Report, visit http://www.Interthinx.com.

About Interthinx
Interthinx, a Verisk Analytics (Nasdaq:VRSK) subsidiary, provides essential solutions to mitigate risk in the mortgage and retail lending marketplace. Interthinx offers capabilities in mortgage fraud and verification, property valuation, compliance, quality control, loss mitigation, retail loan loss forecasting, and capital planning that are used by the nation”s top financial institutions. Interthinx helps its clients minimize risk, increase operational efficiencies, satisfy regulator demands, manage data verification, and remain compliant. For more information, visit www.interthinx.com or call 1-800-333-4510.

Release: Immediate

Contact:

Kerri Milam
Telephone: 301-337-8477
E-mail: kerri@depthpr.com