Interthinx: Multi-Unit Properties Have Much Higher Mortgage Fraud Risk

Posted by Patrick Barnard on February 27, 2014 No Comments
Categories : Mortgage Servicing

Mortgage loans associated with multi-unit properties have a much higher fraud risk than loans associated with other property types, according to Interthinx's fourth quarter 2013 Mortgage Fraud Risk Index report, which assesses the degree of mortgage fraud risk for residential properties by ZIP code.

Multi-unit properties reached a score of 250 on the index for the fourth quarter – more than double the risk of single-family residences, condos or planned unit developments.

A release for the report does not detail the factors that cause multi-unit properties to have higher fraud risk.

The overall risk of mortgage fraud in the fourth quarter decreased 7% compared to the third quarter, to reach a value of 101 on the index. Compared to the fourth quarter of 2012, the overall risk increased 2%.

The decline in the national mortgage fraud risk index value was driven by a 19% decrease in identity fraud risk and, to a lesser extent, a 5% decrease in occupancy fraud risk, Interthinx says in a release. The employment/income fraud risk index was the only index to increase the fourth quarter – up 1%.

California continued to be the riskiest state for mortgage fraud in the fourth quarter, with a risk index value of 139. Eight of the state's metropolitan statistical areas (MSAs) are among the top 10 for overall risk. What's more, nine of the top 10 MSAs for employment/income fraud risk are in California, as are six of the top 10 riskiest ZIP codes in the U.S.

Tulsa, Oklahoma, was the riskiest MSA the fourth quarter, with a mortgage fraud risk index value of 175, up 20% from the third quarter. Tulsa ranks number one for identity fraud risk, number two for occupancy fraud risk and number three for property valuation fraud risk.

‘One of the lessons lenders should take from this quarter's report is not to overlook the most obvious areas for fraud risk,’ says David G. Kittle, senior vice president of industry strategy for Interthinx. ‘For example, it's not surprising that this quarter's report showed high risk in multi-unit property loans, as they are most often used as investment vehicles and have a high propensity for occupancy and employment/income fraud. Knowing the market and where the risks lie go a long way in preventing fraudulent loans from reaching the postfunding stage.’

‘It's important for lenders to take the long view when it comes to fraud risk and not become complacent when it seems as though the risk is declining,’ adds Jeff Moyer, president of Interthinx. ‘While the national fraud index was down from last quarter, our findings still showed that it was up compared with this time last year. As always, there is a greater risk for fraud in a tightening purchase market, and all evidence seems to point to this scenario for 2014. One must always be vigilant where fraud risk is concerned.’

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