From the NYT:
Falsified applications are now the most common type of mortgage fraud, their incidence having risen steadily for the last three years, according to LexisNexis Risk Solutions’ annual mortgage fraud report.
The report, scheduled for release on Monday, breaks down the composition of verified mortgage fraud activity in 2013 as reported by lenders, insurers and other subscribers to a LexisNexis database known as MIDEX. The database tracks only fraud involving industry professionals, such as loan officers, real estate agents and appraisers.
“Eighty percent of all mortgage fraud involves a professional,” said Tim Coyle, the company’s senior director of financial services and an author of the report. “It almost has to — it’s a very complex game.”
Seventy-four percent of the investigated loans reported in 2013 involved application fraud, up from 69 percent in 2012, and 61 percent in 2011. Application fraud involves misrepresenting a borrower’s background or circumstances by providing a lender with false information about crucial factors, such as income, employment or intent to occupy the property. Identity theft or invalid Social Security numbers may also come into play.
Mr. Coyle attributed the rising incidence of application fraud to tight credit conditions that make it harder for borrowers to qualify and for industry professionals to profit. Credit fraud also increased last year, according to Jennifer Butts, the manager of data insight and also an author of the report. Credit fraud, such as undisclosed debt on a credit history or misrepresentation on the credit report, occurred in 17 percent of reported fraud investigations, which was a big jump from 5 percent in 2012, she said.
Appraisal fraud, however, dropped to a five-year low of 15 percent of reported loans. Mr. Coyle credited federal regulations adopted several years ago aimed at preventing corruption of the appraisal process by professionals with a financial stake in the mortgage transaction.
The report also ranks the states according to the seriousness of their mortgage fraud problem relative to their share of origination volume. Florida ranked first as having the worst fraud problem for the fifth consecutive year, followed by Nevada and New Jersey.