Study: Fraud Risk Grows In Refi Market

Refinancing is anything but routine, a new study commissioned by the American Land Title Association (ALTA) shows.

Fraud and forgery claims tied to refinancing now represent 40% of all title insurer losses and expenses, the study by Milliman, a global consulting and actuarial firm, found.

The average cost for fraud and forgery claims is almost seven times higher than all other types of claims resulting from refinance transactions.

The two issues cannot be identified through public records, meaning lenders and consumers cannot see them coming until after the fact. But together, the report figures that they now average more than $207,000.

“Refinances are by no means risk-free,” said ALTA CEO Chris Morton. “Fraud and forgery are actually more common and more costly in refinance transactions compared to purchase transactions.”

Lender title insurance policies usually protect against the three most common threats — fraud (23%), forgery (16%), and the third most common claim, lien priority issues (15%).

Title insurers participating in the survey represented more than 90% of the industry’s annual premium volume in 2023. The claims data provided by participants reflects data on nearly 162,000 claims, including both purchase and refinance transactions.

Together, these claims represent some 80% of the industry’s total number of reported claims associated with policies issued between 2014 and 2023.