Fraud on the rise in mortgage applications

by Ryan Smith27 Mar 2017

Fraud and misrepresentation in mortgage applications is on the rise, according to new data from First American Financial Corporation.

According to First American’s Loan Application Defect Index, the frequency of defects, fraud and misrepresentation in mortgage applications was up 4.1% month over month in February. It was also up 1.3% year over year, although it was still 25.5% lower than its peak in October of 2013.

The Defect Index for purchase transactions was up 2.4% both month over month and year over year. The refinance defect index rose 3.4% month over month in February, but was down 6.4% from February of 2016.

According to Mark Fleming, chief economist at First American, the recent Fed interest-rate hike, and the resulting upward pressure on rates, tend to push fraud levels upward.

“Defect, fraud and misrepresentation risk continues to respond to the shift in market composition. Rising mortgage rates continue to increase the share of higher risk purchase loan applications, but they are also incenting more borrowers to apply for ARMs,” Fleming said. “The savings for the consumer can be significant, but ARM loan applications have historically had higher defect, misrepresentation and fraud risk,” said Fleming. “The increasing popularity of adjustable rate mortgages is something to keep an eye on as the spring home buying season warms up.”

Wyoming saw the largest year-over-year increase in defect frequency, with defects shooting up by 43.1%. Connecticut saw the largest decrease, with mortgage application defects falling by 9%.

Related stories:
Defects, fraud on the rise in January mortgage apps
Government fraud case against Bank of America officially dead


  • by Jackie | 3/27/2017 11:33:20 AM

    Not surprised...with most of the laws being reversed by the new government...we will be going backwards

  • by gh | 3/27/2017 12:43:41 PM

    These laws have been in place and they only thing they hurt was the economy. ARMS have always been around and deoending on the State a non QM mortgage to a business could be in the humdreds of percent. Wake up. The old administration and the party that said "we are here for the people" siply mmet in a back room somewhere to take out brokers which did not cause the banks and wallstreets failures. Dimon became a bilionaire , Wells gets away with fraud and BOA was able to take over the best wholesaler that was able to beat banks. Barney Frank and the banks are able to hide billions of dollars by increasing the appraisal costs tot he consumer and owning AMC's . This controls reaal estate values and add to the fact the Fannie mae . FHLMCC and other financing is gcontrolled by the gov't ( who has run the deficit up to nearly $20,000,00,000. making it almost impossibe for the country not to be run into tthe ground while non amaericans are fed and provided cell phones and medical .. Come on !!

  • by Jon | 3/27/2017 1:36:13 PM

    Grammatically , that was the worse reply and hard to understand statement, that I have ever read. Please proofread your replies.


Should CFPB have more supervision over credit agencies?