Reported incidents of mortgage fraud and misrepresentation by professionals in the mortgage industry are continuing to climb and increased by 7% from 2008 to 2009, according to a new report released by the Mortgage Asset Research Institute (MARI), a LexisNexis service. While the pace has slowed since the 2007-2008 increase of 26%, the continued increase is believed to be attributed to better industry reporting and policing, MARI says.
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 MARI subscribers.
Florida, which ranked No. 1 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, MARI reports. Rhode Island is not ranked on the top-10 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 MARI's top-10 list for New Jersey and Virginia.
‘The data suggests that in 2009, there was a seven 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," comments Jennifer Butts, LexisNexis MARI manager of data processing and co-author of the report. "While this is a noticeable increase, we believe that mortgage fraud is significantly understated, even during times of massive origination volumes."
The top fraud incident type in 2009 – representing 59% 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% of reported misrepresentation in 2008 to 33%. With an 11% increase, this is the most notable increase in reported fraud types in 2009.
The states with the highest concentration of appraisal fraud and misrepresentation nationwide are all located in the Midwest: Ohio, Illinois and Michigan.
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% in 2005 to 59% in 2009.