Mortgage application fraud was down in Q3 – a drop that was driven largely by increased refis. But why do more refinances mean less fraud?
Mortgage application fraud was down in the third quarter, driven largely by increased refinance activity, according to new data from CoreLogic.
CoreLogic’s National Mortgage Fraud Index dropped from 113 in the second quarter to 108 in Q3. According to CoreLogic, increased refi activity helped push overall fraud risk down. “Refinances historically have lower levels of application fraud risk,” CoreLogic said in a report.
Application fraud risk for conforming, owner-occupied refinance loans dropped from an index level of 20 to 18 quarter over quarter, while the relative volume of that segment of the market increased by 18%.
So why does more refinance mean less fraud? Apparently fraudsters just don’t go for refinances as often as purchase loans.
“Our research finds that refinance applications are inherently less risky than purchase applications, so defect and fraud risk declines as refinance applications become a larger share of the overall mix of loan applications,” Mark Fleming, First American Financial Corporation, told BusinessWire in June.
That doesn’t mean risk was down across the board in the third quarter, however. Fraud risk actually went up for higher loan-to-value purchase loans with greater than 80% LTV. However, the relative volume for that segment dropped 16% in Q3, according to CoreLogic.
Several cities – including El Paso, Texas, Buffalo, N.Y., and Scranton, Pa. – saw “significant increases” in fraud risk, according to CoreLogic.
“We are watching them closely to determine if the increase is a short-term anomaly or a long-term trend,” CoreLogic said.
The Miami-Fort Lauderdale-West Palm Beach metro area had the highest risk of mortgage application fraud in Q3, according to CoreLogic. It was followed by Deltona-Daytona Beach-Ormond Beach, Fla., New York-Newark-Jersey City, Tampa-St.Petersburg-Clearwater, Fla., and El Paso, Texas.
CoreLogic’s National Mortgage Fraud Index dropped from 113 in the second quarter to 108 in Q3. According to CoreLogic, increased refi activity helped push overall fraud risk down. “Refinances historically have lower levels of application fraud risk,” CoreLogic said in a report.
Application fraud risk for conforming, owner-occupied refinance loans dropped from an index level of 20 to 18 quarter over quarter, while the relative volume of that segment of the market increased by 18%.
So why does more refinance mean less fraud? Apparently fraudsters just don’t go for refinances as often as purchase loans.
“Our research finds that refinance applications are inherently less risky than purchase applications, so defect and fraud risk declines as refinance applications become a larger share of the overall mix of loan applications,” Mark Fleming, First American Financial Corporation, told BusinessWire in June.
That doesn’t mean risk was down across the board in the third quarter, however. Fraud risk actually went up for higher loan-to-value purchase loans with greater than 80% LTV. However, the relative volume for that segment dropped 16% in Q3, according to CoreLogic.
Several cities – including El Paso, Texas, Buffalo, N.Y., and Scranton, Pa. – saw “significant increases” in fraud risk, according to CoreLogic.
“We are watching them closely to determine if the increase is a short-term anomaly or a long-term trend,” CoreLogic said.
The Miami-Fort Lauderdale-West Palm Beach metro area had the highest risk of mortgage application fraud in Q3, according to CoreLogic. It was followed by Deltona-Daytona Beach-Ormond Beach, Fla., New York-Newark-Jersey City, Tampa-St.Petersburg-Clearwater, Fla., and El Paso, Texas.
