CoreLogic Studies Short Sale Fraud

Posted by Orb Staff on August 11, 2010 No Comments
Categories : Mortgage Servicing

The estimated industry financial impact of short sale fraud is $310 million annually, with the risk of ‘unnecessary losses’ occurring in one in every 53 short sale transactions, according to a new CoreLogic study titled ‘The Cost of Short Sales.’ The average amount of unnecessary loss is $41,500 per short sale transaction, the data provider says.

‘By definition, short sales constitute a financial loss to lenders but will continue to be a necessary part of the mortgage industry as it seeks stabilization,’ says Tim Grace, senior vice president of fraud analytics at CoreLogic. ‘The primary objective for lenders is to eliminate unnecessary loss. The best way to mitigate fraud risk and unnecessary loss is through a collaborative effort where lenders collectively share pre-closing and post-closing information.’

Short sale transactions may be deemed risky to the lender when either the price of a subsequent sale of a property is vastly higher than the original short sale amount, and/or when the two sale transactions are executed within a very short window of time, CoreLogic says.

The CoreLogic transaction data used for the study represent 98% of residential real estate transactions and 85% of mortgage financing details. The company says the number of short sales has more than tripled since 2008, with the estimated annual volume at 400,000 transactions. Over half (55.8%) of all short sales occur in just four states: California, Florida, Texas and Arizona.

SOURCE: CoreLogic

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