The risk of mortgage fraud in Sin City helped land the Silver State at the top of a list states where the risk is greatest. But the Windy City is fast approaching the lofty levels listed for Las Vegas. Outside these problem areas, though, lenders mostly kept a lid on fraud risk — with valuation fraud showing a consistent improvement.
The risk of mortgage fraud has barely changed since the end of the third quarter and the end of last year.
That was one of the findings outlined in the Q4 2010 Mortgage Fraud Risk Report released by Interthinx. The report considers more than 40 indicators of fraudulent activity.
The national Mortgage Fraud Risk Index was 140, a little lower than the third quarter’s 144. An index of 100 would represent a “nominal level of fraud risk.” The latest index was also lower than the fourth-quarter 2009’s 145.
The biggest increase in fraud risk, 26 points, was in Illinois. One reason for the prominent standing is the risk in the Chicago zip code 60621 — which has “dramatically” increased over the past three quarters. The risk index for the 60621 zip code landed at 568 — higher than any other zip code.
“Increases in fraud in the Chicago area may illustrate the danger of previously localized risks spreading throughout a metropolitan area,” the report said.
Nevada, however, held the crown for the highest state index: 255. The state also landed at the top of the top of the list of states with the worst foreclosure rates during January, with one housing unit in 93 facing a foreclosure.
Within Nevada, the Las Vegas-Paradise metropolitan area had the highest fraud index of any MSA in the country: 288.
The next five-worst MSAs were all located within California with indices ranging from 251 to 269.
Also on Interthinx’s highest-risk list were Arizona and Florida.
The risk of employment-income fraud and identity fraud jumped more than a quarter from a year ago because of fraud with refinances, distressed purchases and loan modifications. The employment index was 28 percent higher to 101, and the identity fraud index climbed 27 percent to 190.
The national occupancy fraud index was 64, with occupancy fraud falling again — a trend that began in the second-quarter 2010. Interthinx explained that occupancy fraud is closely associated with undisclosed investment properties, and short-sale purchasers utilizing non-bank funding sources are helping to drive this index lower.
The reported indicated that the property valuation fraud risk came in at 254 and has been lower each quarter since the first three months of last year. The trend was attributed to “properties acquired through ‘flopping’ short sale frauds, which played a large part in the run up in this index in 2008 and 2009, are now being sold to end buyers at or near actual fair market values.”
But Interthinx made no mention of new appraisal order procedures that reduce appraiser pressure to come in with a higher value.
