Misrepresentation surfaces as risk factor
Mortgage fraud risk saw a slight uptick in the last quarter of 2023, continuing a trend seen over several quarters, according to the latest CoreLogic Quarterly Mortgage Fraud Brief report.
CoreLogic attributed the increase to the high volume of purchase loans, which typically carry a higher risk compared to refinances.
The percentage of purchase loans remained elevated, staying above 70% of all transactions for the seventh consecutive quarter - a “new trend brought on by the higher rates and lack of inventory,” according to the report.
Government-backed purchase share also continued rising, reaching 27% of all purchase transactions due to an increased mix of low-down-payment FHA loans.
“Fraud risk was up slightly quarter-over-quarter, but relatively flat year-over-year. This continues a trend we have witnessed over the past several quarters, despite the high level of purchase loans relative to refinances,” CoreLogic said in the report. “Purchase loans are traditionally higher risk compared to refinances.”
The CoreLogic National Mortgage Application Fraud Risk Index for Q4 2023 was 127, up 2.7% from the previous quarter, and down 1% from the same period in 2022. The minimal change reflects a generally stable risk level.
“Quarter-over-quarter, the same 15 riskiest metros we observed in Q3 are still in our top 15, with minor changes in overall risk noted in each metro,” CoreLogic stated.
The top five highest fraud risk metros include:
- Miami-Fort Lauderdale-Pompano Beach, FL
- Bridgeport-Stamford-Norwalk, CT
- Poughkeepsie-Newburgh-Middletown, NY
- New Orleans-Metairie, LA
- New York-Newark-Jersey City, NY-NJ-PA
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Income falsification has also emerged as a growing concern. CoreLogic’s clients reported increasing income falsification tactics, where a borrower’s income is inflated via a new wage-based job after being self-employed.
“Many of our clients have noted that instances of income falsification have increased,” CoreLogic reported. “The current trend centers around borrower income being inflated by a new, high-wage job after previously being self-employed.”
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