Most types of mortgage fraud are on the rise, Interthinx reports, noting increases in its risk index for occupancy fraud, employment/income fraud and property valuation. The latter is up more than 100% from two years ago, the company says in its Mortgage Fraud Risk Report for the fourth quarter of 2009.
The occupancy fraud risk index rose 16% since last quarter – the first significant increase in the index since the fourth quarter of 2006, Interthinx explains. The magnitude of the quarter-on-quarter increase suggests that occupancy fraud risk will be a serious issue going forward as continuing price declines and get-rich-quick schemes lure investors back into the market and as builders face continuing difficulty in moving unsold inventory.
Despite a slight (4%) quarter-on-quarter decrease, the property valuation fraud risk index is up 40% over last year and up more than 100% from two years ago. Schemes involving short sales, real estate owned inventories, wholesale flipping and refinancing by borrowers whose equity has been impaired by falling real estate values continue to drive this index.
Interthinx analysts expect lenders to focus more closely on fraud risk mitigation as they work to emerge from the downturn. This will help guard against the potential for fraud as a large number of adjustable-rate mortgage (ARM) loans – especially option ARMs with negative amortization features – reset between now and the first quarter of 2012.