Reported incidents of subscriber-verified mortgage fraud and misrepresentation by professionals in the mortgage industry in the U.S. have decreased from 2009 to 2010, according to a new report released by the LexisNexis Mortgage Asset Research Institute (MARI). Florida, ranked number one in 2009, is once again first place in the country for reported mortgage fraud and misrepresentation based on the Mortgage Asset Research Institute Fraud Index. Florida also has just over three times the expected amount of reported mortgage fraud and misrepresentation for its origination volume. New York remained in second place, followed by California in third.
The 13th Periodic Mortgage Fraud Case Report examines the current state of subscriber-verified residential mortgage fraud and misrepresentation in the U.S. committed by industry professionals, based on data submitted by LexisNexis Mortgage Asset Research Institute subscribers.
Reports of fraud and material misrepresentation submitted to the LexisNexis Mortgage Asset Research Institute decreased 41 percent from 2009 to 2010, the first time in several years there was a decrease. This decrease does not necessarily correlate to actual occurrences of mortgage fraud, which are still rising according to several industry sources, including Mortgage Fraud Suspicious Activity Reports (SARs) submissions. The decline brings the number of cases reported to the LexisNexis Mortgage Asset Research Institute in 2010 to the same level (by less than half a percentage point) as the number of reported cases in 2006. The decrease in reports is believed to be attributed to several factors, including a decrease in loan origination volumes, fewer resources available to investigate and report incidents and new and stronger Financial Crimes Enforcement Network (FinCEN) requirements that encourage professionals to report on suspected fraud.
“The data suggests that in 2010 there was a decrease in the number of verified incidents of fraud reported to the LexisNexis Mortgage Asset Research Institute. While this is a noticeable decrease, we believe it can be attributed to a variety of factors, including the post-economic crisis mortgage fraud landscape,” said Jennifer Butts, LexisNexis Mortgage Asset Research Institute manager of data processing and co-author of the report. “We are seeing the convergence of several factors, including decreasing loan origination volumes and fewer resources available to investigate and report incidents of fraud as discovered.”
“Mortgage fraud has become more complex and harder to verify using traditional methods,” said Denise James, LexisNexis Risk Solutions director of real estate solutions and co-author of the report. “Mortgage businesses are quickly trying to implement new procedures to detect emerging frauds while, at the same time, focusing their energies on recovering the huge financial losses of recent years."