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Interthinx Report Finds Mortgage Fraud on the Rise in the Windy City

Feb 17, 2011

Interthinx has released its quarterly Mortgage Fraud Risk Report, covering data collected in the fourth quarter of 2010. The report, which tracks overall and type-specific mortgage fraud risk, provides an in-depth analysis of fraud risk from specific ZIP codes at state and national levels. The fourth-quarter report indicates that fraud risk in Chicago’s ZIP code 60621, which has been the riskiest ZIP code in the United States for three consecutive quarters, may have driven risk higher for the entire city. Chicago’s overall risk has increased dramatically since second-quarter 2010, from “moderate” to “very high risk” in the fourth quarter; and Illinois’ quarter-on-quarter jump of 26 index points was the largest nationally. This data suggests that “very high” fraud risk at the ZIP code level can, in a short period of time, spread and elevate the overall risk of much larger geographies. Analysts also noted that short sales and real estate-owned (REO) sales constitute a significant share of all sales in the majority of the highest-risk MSAs (metropolitan statistical areas) in the Occupancy and Property Valuation Fraud Risk indices, which both rose by more than 25 percent over the last year. Mortgage fraud risk is acute in short-sale transactions in part because servicers and loss mitigation departments do not typically screen for fraud. “With employment/income and identity fraud risk up by more than 25 percent in 2010, lenders need to be more vigilant about using fraud detection systems during refinancings, modifications, and purchase transactions that involve the resale of distressed properties,” said Kevin Coop, president of Interthinx. “In addition, short sales represent an acute risk to lenders. The large number of distressed borrowers, the lack of risk controls, and government pressure to avoid foreclosures are producing an environment that in some ways resembles the mortgage market of 2005 to 2006. Lenders and servicers who do not employ robust risk controls and analysis at every stage of the mortgage life cycle face significant financial losses.” The Mortgage Fraud Risk Report is an Interthinx information product created by an internal team of fraud experts. The report was prepared with input from Constance Wilson, Ann Fulmer, Shane De Zilwa, and the Interthinx analytics team. This is the seventh time Interthinx has released its quarterly report, which is providing deeper insight into current fraud trends through analysis of the more than 12 million loan applications amassed from the industry’s use of the Interthinx FraudGUARD loan-level fraud detection tool. For more information, visit
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Feb 17, 2011
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