As rates ease and overall mortgage applications have risen 8% from Q2 2025 to Q3 2025, Cotality took a deeper look at mortgage fraud risk instances nationwide in Q3 in its latest National Mortgage Application Fraud Risk Index. The results … fraud is up year-over-year, with instances of undisclosed real estate fraud leading the way.
Overall, Cotality found that mortgage fraud risk rose 8.2% year-over-year in Q3, however, it dropped by 2.7% from Q2 of 2025. The report found an estimated one in 118 mortgage applications had indications of fraud within them.
For their breakdown, Cotality examined six areas of mortgage fraud and found an increase in only one area — undisclosed real estate fraud. This category of fraud increased 9.1% year-over-year. Undisclosed real estate fraud includes undisclosed debt, possible occupancy misrepresentation, and/or derogatory credit events (foreclosure, NOD, short sale, etc.) being hidden from the lender.
The rise in undisclosed real estate fraud could be due to an increase in investors and more being forced to rent due to higher home prices and mortgage rates still exceeding the 6%-mark.
“Undisclosed real estate was once again the fraud segment with the highest increase,” said Matt Seguin, senior principal with Cotality Fraud Solutions. “As the percentage of investors grows, more borrowers have multiple properties and mortgages. Oftentimes, those mortgages are being refinanced simultaneously, and they may be with different lenders. This could be why we’re seeing a continuing uptick in undisclosed real estate debt.”
Cotality’s system for warning about falling property values has seen a large increase in alerts, jumping 42% in the last quarter and 400% compared to a year ago. Cotality's Home Price Index confirms prices are dropping across much of the U.S as inventory increases.
There were also increasing risk trends in Q3 in several other areas, including:
- Income: An increase in alerts related to high income compared to the value of the property being purchased. This could be an indicator of inflated income or misrepresentation of occupancy.
- Identity: Increased alerts about attempted identity theft including using a deceased borrower’s social security number or other names associated with a social security number.
- Occupancy: Increased alerts that a primary or a second home will not be occupied as disclosed. This includes claiming owner-occupied properties when there has been a rental listing found on the property or a primary residence that has a different tax mailing address.
Cotality’s data reveals that the two highest-risk categories are in the investment and multifamily spaces. Cotality’s data estimate for Q3 2025 shows one in 45 investment applications, and one in 26 multifamily applications have indications of fraud risk compared to an overall average estimate of one in 118 for the industry as a whole.
