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The latest s e c on da r y m a r k e t a na ly t ic s Se r v ic i ng Or ig i nat ion SERVICING Mortgage Fraud Hits Close to Home in Some States Though deceptive activity has displayed declines, highrisk regions remain as the fight against mortgage-related financial crimes continues. T he national mortgage fraud index fell to the lowest level in two years after spiking in the previous quarter, according to data from Interthinx. The mortgage fraud index dropped to 137 in the third quarter of 2012, down 7.7 percent 48 | The M Report from the previous quarter and 4.5 percent from the same quarter in 2011, the analytics company reported. The number of metropolitan areas in the very high-risk category also declined, falling to 70 in the third quarter from 91 in the second quarter. Two states—California and Florida— accounted for more than half of the very high-risk metros. The number of metro areas considered very high risk increased by one in Florida, bringing the state to 17. Meanwhile, California's total stayed flat at 19. Merced, California, led as the riskiest metro, and the state held six out of the top 10 metros most at risk for fraud. Florida's high fraud index value of 206 gave it the lead as the riskiest state. Nevada was a close second with its value of 205. Arizona, New Jersey, and California took the next three spots. According to Interthinx, the mortgage fraud indices are proven indicators of default and foreclosure activity, so areas with a high risk for fraud are expected to maintain their high foreclosure rates. "The report shows that even when overall fraud risk is decreasing nationwide, there are still areas of concern, as we see with this quarter's findings in Florida," Mike Zwerner, SVP of Interthinx, said in a release. "The report's actionable intelligence helps lenders pinpoint where additional due diligence may be needed, improves loan quality, reduces repurchase risk, and ultimately helps the economy recover." The company tracks four specific types of mortgage fraud: property valuation, identity, occupancy, and employment/ income. Risk for property valuation fraud was concentrated in California and Florida metros. The nationwide index value for property valuation fraud was 203, but in Merced, California, and Lakeland, Florida, the respective values were 498 and 438. Iowa City, Iowa, led as the most risky metro for identity fraud. The metro had an index value of 325 and has seen a 118 percent quarterly increase. Two Michigan metros ranked high for occupancy risk, with Lansing leading as the most risky metro and Monroe ranking third. The report also found investor properties are more than three times as risky for employment/ income fraud as owner-occupied properties. Salinas, California, was the most risky metro for employment/income fraud, and eight out of the top 10 metros were in California.