Mortgage Fraud Continues to Climb According To LexisNexis® Mortgage Asset Research Institute
Incidents of Mortgage Fraud Increase 7 Percent from 2008 to 2009
Florida, New York and California Top List of States with Highest Mortgage Fraud and Misrepresentation Rates
New York, NY – Reported incidents of mortgage fraud and misrepresentation by professionals in the mortgage industry in the U.S. are continuing to climb and increased by 7 percent from 2008 to 2009, according to a new report released today by the Mortgage Asset Research Institute, a LexisNexis® service. While the pace has slowed since the 2007-2008 increase of 26 percent, the continued increase is believed to be attributed to better industry reporting and policing.
The 12th Periodic Mortgage Fraud Case Report examines the current state of residential mortgage fraud and misrepresentation in the U.S. committed by professionals, based on data submitted by LexisNexis® Mortgage Asset Research Institute subscribers.
Top 10 States for Mortgage Fraud and Misrepresentation (Click image to enlarge)
Florida, ranked number one in 2006 and 2007, has moved back into first place in the country for mortgage fraud and misrepresentation after being displaced in 2008 by Rhode Island. Florida also has close to three times the expected amount of reported mortgage fraud and misrepresentation for its origination volume. Rhode Island is not ranked on the Top-Ten list for 2009 because the state's sample size did not meet the minimum requirements set for the survey.
New York moved into second place, followed by California, Arizona, Michigan, Maryland, New Jersey, Georgia, Illinois, and Virginia. This is the first appearance on the LexisNexis Mortgage Asset Research Institute Report Top-Ten list for New Jersey and Virginia.
The detailed report was released at the MBA's annual National Fraud Issues Conference in Chicago. The full report, as well as previous year's reports, is available on the LexisNexis Mortgage Asset Research Institute Web site at: http://www.lexisnexis.com/risk/fraudreport
"The data suggests that in 2009 there was a 7 percent increase in the number of incidents of fraud reported to the LexisNexis Mortgage Asset Research Institute on top of the 26 percent increase reported in 2008. While this is a noticeable increase, we believe that mortgage fraud is significantly understated, even during times of massive origination volumes," said Jennifer Butts, LexisNexis Mortgage Asset Research Institute manager of Data Processing and co-author of the report.
"Lenders are facing hurdles with compliance, loss mitigation and staving off additional financial losses due to poor loan performance," said Denise James, LexisNexis® Risk Solutions director of Real Estate Solutions and co-author of the report.
"This is not to say that mortgage fraud is going away; it is still a serious problem, and new trends continue to emerge. It remains critical for those in the mortgage industry to reassess their processes, work together by sharing information and reporting incidents of fraudulent activity, and ready themselves for more complex schemes in order to continue the fight against mortgage fraud," said James
The top fraud incident type in 2009 – representing 59 percent of all reported fraud types – was application misrepresentation. This is the sixth year in a row it has topped the list. In second place were frauds related to appraisal and valuation misrepresentation, which increased from 22 percent of reported misrepresentation in 2008 to 33 percent; with an 11-percent increase, this is the most notable increase in reported fraud types in 2009. Additional documented fraud types included, in order of volume, verifications of deposit, verifications of employment, escrow or closing costs, and credit reports. Overall there has been a slight downward trend in total application fraud and misrepresentation moving from a high of 67 percent in 2005 to 59 percent in 2009.
"The information contained in LexisNexis Mortgage Asset Research Institute's 2009 Report serves as yet another wakeup call for the industry on the status and continued presence of mortgage fraud," said Darius Bozorgi, president and CEO of Veros. "We at Veros have been following these developments for years and based on our own analysis and experience we agree with the findings contained in the report. Fraud increases risk exponentially, and the industry must meet this threat head on using all available intelligence and tools. Fortunately, the tools are increasing in availability and sophistication to address the challenges posed by perpetrators."
The report also found that:
- Arizona has moved into the top five for the first time;
- Eight of the top ten states are in the eastern half of the country;
- New Jersey and Virginia made their first appearance in the top ten for loans originated in 2009; and
- The states with the highest concentration of appraisal fraud and misrepresentation nationwide are all Midwestern States — Ohio, Illinois, and Michigan.
The LexisNexis® Mortgage Asset Research Institute provides valuable industry insight derived from its Mortgage Industry Data Exchange (MIDEX®) database, which contains an aggregation of reported incidents of fraud and verified misrepresentations submitted by leading mortgage industry participants. The LexisNexis Mortgage Asset Research Institute analyzes this industry data and presents reports that depict a national composition of residential mortgage fraud and misrepresentation to support the industry's effort in the fight against mortgage fraud.
LexisNexis® (www.lexisnexis.com) is a leading global provider of content-enabled workflow solutions designed specifically for professionals in the legal, risk management, corporate, government, law enforcement, accounting and academic markets. LexisNexis originally pioneered online information with its Lexis® and Nexis® services. A member of Reed Elsevier [NYSE: ENL; NYSE: RUK] (www.reedelsevier.com), LexisNexis serves customers in more than 100 countries with 18,000 employees worldwide.
About Mortgage Asset Research Institute
The Mortgage Asset Research Institute is a premier provider of mortgage fraud prevention solutions and information services to the mortgage and financial services industries. The 600 plus subscribers represent the entities involved in over 80% of the wholesale mortgages originated in the United States. The Mortgage Industry Data Exchange (MIDEX®) service assists lenders in identifying mortgage and real estate professionals that have been associated with fraudulent activity or serious misrepresentation. For more information about services to combat mortgage fraud, go to http://www.lexisnexis.com/risk/fraudreport
About LexisNexis Risk Solutions
LexisNexis® Risk Solutions is the leader in providing essential information that helps advance industry and society. Building on the legacy of proven LexisNexis® services from the past 30 years, our cutting-edge technology, unique data and advanced scoring analytics provide total solutions that address evolving client needs in the risk sector while upholding high standards of security and privacy. LexisNexis Risk Solutions serves commercial organizations and government agencies and is comprised of several affiliated corporations, each offering premier customer-focused solutions. For more information, visit lexisnexis.com/risk.
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