TheMReport — News and strategies for the evolving mortgage marketplace.
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42 | TH E M R EP O RT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T ORIGINATION THE LATEST Fraud: How are Mortgages at Risk? CoreLogic recently took a look at the overall fraud risk outlook for 2017. C oreLogic Senior Director of Fraud Solutions Strat- egy Bridget Berg recently took a look at the overall fraud risk outlook for 2017. Based on CoreLogic's information, fraud risk increased by about 17 percent year-over-year and is now at its highest level since 2010. "Keep in mind, however, that in historical terms, fraud, overall, is still relatively low, given the tighter underwriting since the mortgage crisis, and the amount of rate and term refis over the past few years," said Berg. However, in 2017, despite the decrease in application volumes, the total number of applications with fraud is higher than last year, in fact, CoreLogic discovered 13,404 applications with indications of fraud in Q2 2017 alone. Berg said there are two main drivers of fraud risk increases this past year, including a continued increase in purchase transaction share from 55 percent of applica - tions to 66 percent over the last year. The other factor is origina- tions coming through wholesale channels, as these loans have "historically exhibited a higher risk of fraud." According to Berg, there are three types of mortgage fraud on the rise for 2017. First, occupancy fraud risk has increased by 7 percent, which includes traditional occupancy risk and reverses oc - cupancy risk. Second, transaction fraud risk covering straw buyers and falsified down payments has increased about 4 percent. The third type of risk is income fraud risk, which increased 3.5 percent, with "most of the increase happen - ing in the first half of this year." Regionally, the top three states that are at risk for mortgage fraud are New York, New Jersey, and Florida. However, the states showing the greatest growth rate in fraud are lower-risk states in the middle of the country, includ - ing, Iowa, Indiana, and Missouri. Berg notes that for the future, CoreLogic will be monitoring cash-out refinances and home equity loans, as rising home prices and homeowner equity, they are forecasted to become prevalent. The fraud risk on these products is higher than it is for rate and term refinances, so Berg said this is another area to watch over time. A Helping Hand to Achieve Homeownership Most renters intend to purchase a home someday, but according to research by Fannie Mae, the down payment could keep them from that dream. A ccording to the survey, nearly half of respon- dents see the down payment as the biggest obstacle to getting a mortgage. Though 73 percent of current or past homeowners surveyed said they could have afforded a home without their families' help, one- fifth reported receiving financial assistance from family when they bought their first home. Addi - tionally, they also tend to be the group that has the highest home- ownership rates. Among millenni- als, almost two in three reported their families helping them with at least half of the upfront costs of homeownership. "Hispanics and noncollege graduates, whose homeownership rates tend to be lower than the general population's, are less likely to say they received financial assistance when buying a home, even when controlling for other factors," the report stated. The two primary reasons for renting now were financially pre - paring to own a home (28 percent) and the fact that renting is more affordable (25 percent). Following affording the down payment (45 percent), respondents believed the biggest obstacles for getting a mortgage included an insufficient credit score or credit history (43 percent), too much existing debt (18 percent), and the process being too complicated (16 percent). Though minorities were hope - ful they would be able to provide financial assistance to family in the future, they were no more likely to have reported providing financial support in the past. In the general population, 38 per - cent expect to give aid in the future, and 16 percent already have assist- ed—for Caucasians: 31 percent and 18 percent, Hispanics: 51 percent and 16 percent, and African-Americans: 53 percent and 12 percent.