More borrowers lying on mortgage applications

by MPA19 Dec 2014

Despite improving economic conditions, mortgage application fraud and misrepresentations have increased consecutively for the last three years, according to a recent report from LexisNexis Risk Solutions. Seventy-four percent of loans reported in 2013 involved some kind of fraud or misrepresentation on the loan application compared to 69% in 2012 and 61%in 2011.

The LexisNexis Annual Mortgage Fraud Report provided information on the composition of proven residential mortgage fraud and misrepresentation by mortgage industry professionals. The analysis is based on data submitted to the LexisNexis Mortgage Industry Data Exchange (MIDEX).

While overall mortgage fraud is increasing, there has been one big area of improvement. Analysis of the data showed that appraisal and property valuation fraud experienced a significant drop from last year, falling to 15% of loans reported with these problems. In 2012, 26% of loans reported had signs of appraisal and property valuation fraud following 31% in 2011 and 33% in 2010. Regulation changes are cited as the reason for this rapid and dramatic decline in appraisal and property valuation fraud.

“In the U.S., fraud across all industries is close to a trillion dollar problem,” said Coyle. “The results of this study clearly demonstrate that the mortgage industry, like other industries, is making progress in combating fraud in some areas, such as appraisal fraud, but still has a lot of work to do in other areas, such as misrepresentation on credit documentation, which leapt from five percent in 2012 to 17 percent in 2013.”

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The report also examined the states with the highest incidents of mortgage fraud. To rank the states, the LexisNexis Mortgage Fraud Index (MFI) is utilized, which calculates each state’s fraud problem.  For the past five years Florida has topped the list, with an MFI consistently well-above 100—what would be expected based on its amount of loan originations.

Surprisingly, Utah jumped into the top 10 states with the most reported mortgage fraud involving industry professionals.  In four years Utah has gone from an MFI of 27, meaning very little mortgage fraud as compared to its mortgage originations, to an MFI of 149, which ranks it as the state with the seventh largest problem of mortgage fraud, right below New York.

Below is a ranking of the top five states with the highest incidents of mortgage fraud:

STATE

2013 Rank

2013 MFI

2012 Rank

2012 MFI

Florida

1

529

1

698

Nevada

2

221

2

232

New Jersey

3

209

6

130

Arizona

4

201

5

144

Illinois

5

180

4

156

 

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