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Interthinx fraud report finds California ranks tops in the nation for mortgage fraud

Feb 18, 2010

Interthinx has released its quarterly Mortgage Fraud Risk Report, covering data collected during the fourth quarter of 2009. The report includes an analysis of national mortgage fraud and indices for the four most common types of mortgage fraud. It indicates that most fraud types are on the rise, with increases in the risk index for occupancy fraud, employment/income fraud, and property valuation. The latter is up more than 100 percent from two years ago. Interthinx is a leading provider of proven risk mitigation, mortgage fraud prevention, and regulatory compliance tools for the mortgage industry.   Major findings include the following:   ►California now has the highest mortgage fraud risk, with an index value of 222 (n=100). Nevada, which had the highest index for the previous five consecutive quarters, drops to second place with an index of 220, and is closely followed by Arizona with an index of 211. Florida remains in fourth place with an index of 179, while Colorado is in fifth place at 153. ►The occupancy fraud risk index rose 16 percent since last quarter—the first significant increase in the index since Q4 2006. 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 (four percent) quarter-on-quarter decrease, the property valuation fraud risk index is up 40 percent over last year and up more than 100 percent from two years ago. Schemes involving short sales, REO inventories, wholesale flipping, and refinancing by borrowers whose equity has been impaired by falling real estate values continue to drive this index. The Mortgage Fraud Risk Report is an Interthinx information product created by an internal team of fraud experts. Constance Wilson and Ann Fulmer worked closely with the new Interthinx analytics team, composed of seven experienced analytics professionals, four of whom hold Ph.D.s. Interthinx established the new unit to provide deeper insight into the extensive pool of data the company amasses from the industry’s use of its FraudGUARD® loan-level fraud detection tool.   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 loans—especially “option” ARMs with negative amortization features—reset between now and the first quarter of 2012.   “Lenders have expressed their appreciation for our investment to provide a more detailed analysis of the data we’ve been collecting,” said Kevin Coop, president of Interthinx. “Our most recent report provides data that lenders can use to anticipate and prepare for trends that will impact their risk mitigation strategies. The report can ultimately make them more successful at identifying fraud before loans are funded.”   “The Interthinx Mortgage Fraud Risk Report is fast becoming the primary source of information about fraud risk in the mortgage industry, and with good reason,” added Mike Zwerner, senior vice president for Interthinx. “Interthinx has the depth of data to identify, categorize, and help lenders effectively mitigate mortgage fraud risk. Using our own proprietary data along with outside public data resources, the quarterly report reveals where mortgage fraud risk is occurring, where it is migrating, and how schemes are changing. We’re pleased that more institutions are relying on our reports.” The full report is available by clicking here.
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Feb 18, 2010
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