Reported incidents of mortgage fraud in the U.S. are at an all-time high and increased by 26% from 2007 to 2008, according to a new report released by the Mortgage Asset Research Institute (MARI), a LexisNexis service. The 11th Periodic Mortgage Fraud Case Report to the Mortgage Banker's Association (MBA) examines the current state of residential mortgage fraud and misrepresentation in the U.S. based on data submitted by MARI subscribers.
The report found that, for the first time, Rhode Island ranked first in the country for mortgage fraud, with more than three times the expected amount of reported mortgage fraud for its origination volume. This is also Rhode Island's first appearance on the MARI report top-ten list, indicating a problematic and overlooked mortgage fraud problem in the state, MARI says. Florida, ranked first in 2007 and 2006, dropped to second place and is followed by Illinois, Georgia, Maryland, New York, Michigan, California, Missouri and Colorado.
"With fewer loan originations today, the data suggests that the economic downturn may have created more desperation, causing more people than ever before to try to commit mortgage fraud," says Denise James, LexisNexis Risk & Information Analytics Group's director of Residential Mortgage Solutions. "Not only are we seeing traditional fraud trends, such as application fraud, but we are also seeing new types of emerging fraud occur. It is therefore imperative that the mortgage industry continue to share information and insights, and collaborate in the fight against mortgage fraud."
The top fraud incident type in 2008 – representing 61% of all reported frauds – was application fraud, the fifth year in a row it topped the list. The second most prevalent type were frauds related to tax returns and financial statements, which jumped 60% from 17% of reported frauds in 2007, to 28% of reported frauds in 2008. Additional documented fraud types included, in order of volume, frauds related to appraisals or valuations, verifications of deposit, verifications of employment, escrow or closing costs, and credit reports.
"MARI data shows that mortgage fraud is more prevalent today than it was at the height of the boom in mortgage loan originations," adds John Courson, president and CEO of the MBA. "This report is essential reading for mortgage bankers who need to understand where mortgage fraud is coming from, what to watch for and how to protect our companies and communities."
The report can be viewed in its entirety at www.marisolutions.com.
SOURCE: Mortgage Asset Research Institute