Report Finds Rise in Misrepresented Borrower Data
Interthinx has released its 2011 Third Quarter Mortgage Fraud Risk Report, and according to the most recent analysis, employment and income fraud risk is on the rise, up 8.8 percent from third-quarter 2010 and up 50 percent from third-quarter 2009. Company analysts believe the increase is due to borrower data being misrepresented in order to meet debt-to-income (DTI) thresholds required by lenders in the face of stagnant or declining real incomes. Other results uncovered in the most recent report include: ►For the sixth consecutive quarter, the two riskiest states are unchanged: Nevada has the highest fraud risk, with an index value of 255; Arizona is next, with an index value of 243. ►California was the third riskiest state overall, with an index value of 197. It was particularly well represented in all the indices, containing half of the ten riskiest metropolitan statistical areas (MSA), seven of the top ten ZIP codes, and more than half of the top ten MSAs in the property valuation and employment/income indices. ►Non-geographic risk profiling suggests that fraud risk is greatest in loans with high loan-to-income ratios (the ratio of loan amount to monthly income). In general, all the fraud risk indices increase as the loan-to-income ratio increases, so almost universally, the highest indices occur at loan-to-income values close to or greater than 100. “We’ve been carefully monitoring the increase in the employment and income fraud risk index for the last two years,” said Mike Zwerner, senior vice president for Interthinx. “This actionable risk intelligence led us to develop the integration of The Work Number from Equifax within FraudGUARD to provide lenders with an efficient and effective way to confirm a borrower’s ability-to-repay. At Interthinx, we rely heavily on trending from our Mortgage Fraud Risk Report to lead technology and product innovation.” The Mortgage Fraud Risk Report is an Interthinx information product created by an internal team of fraud experts. This is the 10th 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.