New data reveals a concerning uptick in mortgage fraud cases despite subdued borrower demand in the housing market.
The CoreLogic Mortgage Application Fraud Risk Index surged by 8.3% year over year in the second quarter of 2024, with a 1.1% increase from the previous quarter. This trend, according to the real estate data analysis firm, reflects minimal changes in market factors that typically influence mortgage risk.
In Q2 2024, 0.81% of all mortgage applications (1 in 123) were flagged for fraud, with purchase loans (0.9%) showing higher risk levels compared to refinances (0.58%). The report also highlighted that U.S. Department of Veterans Affairs (VA) loans maintained their status as the lowest-risk applications by loan type.
Multiunit dwellings with two to four units were identified as riskier than single-family properties, with a fraud rate of 3.5% on applications. The risk of fraud in these transactions increased by 5% year over year.
Notably, identity fraud and transaction fraud were the two categories that saw a rise in fraudulent activities over the past year. Identity fraud risks increased by 5.5% in 2024, attributed to a growing number of loan programs for foreign nationals with Individual Tax Identification Numbers (ITINs) instead of Social Security numbers.
Transaction fraud risks also saw consecutive increases, with a 4.9% uptick in 2024. Factors such as rapid resales, high-activity buyers, and misrepresented transaction elements contributed to this rise.
Analysis by CoreLogic identified New York, Florida, California, Connecticut, and New Jersey as the states with the highest prevalence of fraud cases, with double-digit percentage increases in California, Connecticut, and Florida since mid-2023.
The firm attributed the steady lending volumes over the past year to sustained high interest rates, noting a minimal shift in loan types. The market saw a significant shift towards FHA-insured loans in 2023, which did not occur in the following year.
Despite fluctuations in specific loan segments, the overall National Mortgage Fraud Index remained relatively stable, reflecting small changes rather than significant shifts in the lending landscape.
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