Decoding Compliance

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Dress code Common Criminals Revealing fraudulent behaviors plaguing today's mortgage market—and providing insight into risk factors to watch during the year ahead—Interthinx's latest index indicated a rise in dangerous activity. What's Causing Fraud to Flourish? Investor Activity: Though fraud risk increased around the country, investor interest in areas hardest hit by the financial crisis created "rapid price changes and opportunities for value manipulation," according to Interthinx. Distressed Assets: Regions with high levels of foreclosures and distressed properties are rife with incidences of fraud. Moyer explained that perpetrators are utilizing tried-and-true forms of fraudulent behavior by "simply shifting strategy to meet opportunity" in such areas. R eaching its highest level since 2009, Interthinx's National Mortgage Fraud Risk Index proved that criminally fraudulent behavior is thriving, even as the country's housing and mortgage industries trudge toward recovery. Evaluating findings through the end of 2012, Interthinx's report revealed that a 25 percent rise in property valuation fraud during the fourth quarter of last year was largely responsible for the nation's elevated risk reading. Interthinx's president, Jeff Moyer, elaborated on key catalysts driving fraud in the marketplace, stating, "Clearly, this report illustrates the reality that the mortgage industry is driven by trends at the state and metropolitan levels and that the will to commit mortgage fraud is not abating." Which Fraudulent Behaviors Are Booming? related to housing values, employment/income fraud among loan applicants is also putting pressure on the marketplace. Property Valuation Fraud: Short Sale Fraud: In states The 16 percent national rise in risk to end 2013 was due primarily to a "large increase" in fraudulent property evaluations. Employment/Income Fraud: In addition to dishonest practices and metropolitan statistical areas (MSAs) where housing recovery is lagging behind the national average, opportunistic fraudsters continue to take advantage of struggling markets through short sale scams. Where Is Risk Most Rampant? Connecticut: Bridgeport and surrounding areas took the third spot on Interthinx's list of top 10 riskiest ZIP codes, with an index score of 514, helping elevate Connecticut to fourth place among states experiencing high levels of fraud. Florida: With an index value of 246, Florida continued to the country's most risky state; both Tampa-St. Petersburg-Clearwater and Jacksonville ranked in the top five MSAs for fraud, scoring 286 and 285 on the index, respectively. Nevada: Currently the nation's second-leading state for fraud, Nevada posted an index reading of 239, and Interthinx credits default and foreclosure activity for generating risk in the region. New Jersey: Ocean City was ranked first among MSAs with high levels of employment/income fraud, while Atlantic CityHammonton was seventh among MSAs experiencing a boom in identity fraud, leaving New Jersey as the nation's third-riskiest state. Ohio: Adding more MSAs to Interthinx's roster of high-risk areas than any other state, rising fraud in eight Ohio cities put it among the index's top five riskiest regions. What's the Nation's Fraud Forecast? High-Risk States Likely to Stay in the Lead: Interthinx projects that Nevada and Florida, where 17 MSAs are considered "very high risk," will continue to experience elevated levels of fraud. A Caustic Environment on the West Coast: Though California fell to No. 8 among the country's riskiest regions, Interthinx placed it on the watch list for 2013, citing the state's 34 MSAs ranked in the "very high risk category." Rise Expected in the East: According to Interthinx, fraudulent activity is migrating east, and the company named Illinois and Ohio as states to watch closely, based on "significant increases to risk" during 2012. About the Survey: The Interthinx Fraud Risk Report represents an in-depth analysis of residential mortgage fraud risk throughout the United States as indicated by the Interthinx Fraud Risk Indices. Published quarterly as part of the Fraud Risk Report, Interthinx will report on the geographic regions with the highest Mortgage Fraud Risk Index as well as those with the highest Property Valuation, Identity, Occupancy, and Employment/ Income Fraud Risk Indices. The Interthinx Fraud Risk Indices track these risks in all states, metropolitan areas, counties, and county equivalents throughout the U.S. The M Report | 19

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