A quarterly report indicates that the five metropolitan areas with the highest risk of mortgage fraud are also the same five areas where foreclosure rates are the highest. Meanwhile, appraisal fraud has become less likely, and improving borrower quality is behind national stabilization in the risk of mortgage fraud.
Interthinx reported its second-quarter Mortgage Fraud Risk Index at 142.
That was not much different than the 144 index previously reported for the first three months of this year and 145 in the second quarter of last year.
“The small magnitude of the changes reflects a relatively flat trend in the index over the last five quarters, with values ranging in a narrow band between 140 and 145,” the report said. “This trend coincides with lender reports that borrower quality has greatly improved.”
Interthinx labeled Stockton, Calif., as the Metropolitan Statistical Area with the highest risk of fraud. The 282 index for the city was a 19 percent deterioration from the first quarter.
Stockton was ranked as the fourth-worst metropolitan area for foreclosures during the first-half 2011 by RealtyTrac, with one filing for each 31 housing units.
Modesto, Calif., had an Interthinx score of 269, making it the second worst area. A foreclosure was filed on each 30 housing units in Modesto, placing it in the No. 3 spot on the RealtyTrac report.
After that was Riverside-San Bernardino-Ontario, Calif., which had a fraud risk index of 257. The MSA was fifth in RealtyTrac’s report.
Phoenix-Mesa-Scottsdale, Ariz. — which is the second-worst market for foreclosures — had an Interthinx index of 253.
No. 5 on Interthinx’s list was Las Vegas-Paradise, Nev. The Interthinx Mortgage Fraud Risk Index in the Las Vegas area was 249.
With one foreclosure filed for each 19 housing units, Las Vegas had the worst foreclosure rate in the country.
Interthinx noted as “a significant change” that there were no Chicago zip codes among the 10 worst U.S. zip codes.
“It suggests that when the industry has actionable intelligence and increases its scrutiny of an area, word gets out, and the fraudsters move on,” Interthinx President Kevin Coop said in a news release.
The risk of valuation fraud has tumbled 19 percent over the past year. The index was trimmed to 221 from the first quarter’s previously reported 223 index.
The risk of identity fraud was reduced by 12 percent from the first quarter and a little more than that since the second-quarter 2010.
The risk of borrowers lying about their intent to occupy the subject property is 11 percent worse than it was a year earlier.
The risk of employment-income fraud was up substantially over the past year. The index came in at 105, rising 24 percent from 12 months prior. This category was 3 percent worse than the first quarter.
