Kroll Reports Quarter-Over-Quarter Rise in Mortgage Fraud
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Kroll Reports Quarter-Over-Quarter Rise in Mortgage Fraud

January 24, 2014

Kroll Factual Data Inc. has announced a 10.41 percent average increase throughout the country of possible fraudulent activity in loan applications submitted to the company for review between the second and third quarters of 2013. The significant increase—the third consecutive quarterly uptick—adds to an already challenging time for lenders, who are faced with having to comply with stringent loan quality regulations from the Consumer Financial Protection Bureau (CFPB) starting this month.
“Even with indications of the U.S. economy and the housing market gaining strength, we are seeing the threat of misrepresentation in mortgage applications rising,” said Rod Bazzani, president of Kroll Factual Data. “The call for increased vigilance and processes for mitigating this risk is at a pitch not to be discounted or ignored. Implementing the appropriate measures to combat potential fraud, be it internally or via a third-party, is of critical importance for lenders.”
Kroll examined metropolitan statistical areas (MSAs) with at least 1,000 loan applications per quarter. Using its proprietary risk analysis and verification engines, Kroll Factual Data isolated certain files that may contain indicators of potential mortgage origination fraud. The top five MSAs posting quarter-over-quarter increases of potential fraud include Huntsville, Ala. (55.39 percent), Fort Collins–Loveland, Colo. (51.42 percent), Manchester, N.H. (40.95 percent), Santa Fe, N.M. (37.47 percent), and Boulder-Longmont, Colo. (32.29 percent).
The following MSAs comprised the top 10 for increases in potential fraud (FY13 Q3 compared with Q2):
1.     Huntsville, AL     55.39%
2.     Fort Collins-Loveland, CO     51.42%
3.     Manchester, NH     40.95%
4.     Santa Fe, NM     37.47%
5.     Boulder-Longmont, CO     32.29%
6.     Philadelphia, PA-NJ     29.24%
7.     Wilmington, DE-NJ-MD     27.43%
8.     Portland, OR-WA     26.35%
9.     Duluth-Superior, MN-WI     26.18%
10.     Appleton-Oshkosh-Neenah, WI     25.37%
Kroll Factual Data has designed a suite of comprehensive information and analytical tools to address certain aspects of mortgage origination and lending. These include its LoanFocus suite of prefunding and post-closing outsourcing services as well as credit and capacity, identity and investigation, collateral and property, and business and professional verifications.
Among the top 10 MSAs with decreases in potential fraud, Phoenix-Mesa, Ariz., posted a significant decrease of over 30 percent. The complete list of the top 10 ifollows. The following MSAs comprised the top 10 for decreases in potential fraud (FY13 Q3 compared with Q2):
1.     Phoenix-Mesa, AZ     -30.14%
2.     Wichita, KS     -26.83%
3.     Peoria-Pekin, IL     -19.41%
4.     Greenville-Spartanburg-Anderson, SC     -18.65%
5.     Bloomington-Normal, IL     -9.72%
6.     Middlesex-Somerset-Hunterdon, NJ     -8.06%
7.     Lowell, MA-NH     -7.72%
8.     Las Vegas, NV-AZ     -7.00%
9.     Davenport-Moline-Rock Island, IA-IL     -6.92%
10.     Albuquerque, NM     -6.87%

Compliance, Originations, Residential, Trends