Report: Dangerous Fraud for Property on the Rise

The crimes that contributed to historic levels of default may be creeping back into the industry

AGOURA HILLS, Calif.--(EON: Enhanced Online News)--Interthinx has released its quarterly Mortgage Fraud Risk Report, reflecting data collected in the third quarter of 2010. The report analyzes national fraud risk and indices for the four most common types of mortgage fraud risk. According to the most recent data available, trends are emerging that may indicate that “fraud for property” (that is, fraud to attain homeownership), once considered to be less dangerous than “fraud for profit,” is returning to the industry. Analysts reached this conclusion after witnessing increases in two of the four types of fraud tracked. Additional data points highlighted by Interthinx analysts include:

“In the past, lenders viewed fraud for property as a more benign type of crime than fraud for profit, but when those loans defaulted, everyone learned how dangerous this type of fraud truly is”

• The Employment/Income and Identity Fraud Risk Indices are both up more than 20 percent over the last year, which may indicate that the incidence of so-called fraud for property is on the increase.

• A closer examination of fraud for property cases shows that there is usually a network of professional enablers involved in these transactions who encourage borrowers to lie about their qualifications or who lie on their behalf. They make a commission each time that a misrepresented loan closes. Seen from that perspective, it is clear that these frauds are committed for profit. Furthermore, since frauds for property sparked the mortgage meltdown as unqualified borrowers began to default in large numbers, it is clear that frauds for property must be identified and addressed going forward with the same urgency as frauds for profit.

• Nevada remains the state with the highest fraud risk, with a Mortgage Fraud Risk Index of 254. Its largest population center, Las Vegas, takes over as the most risky Metropolitan Statistical Area (MSA), with an index of 273. Arizona is the second riskiest state, with an index of 214; California is in third place, with an index of 190.

“In the past, lenders viewed fraud for property as a more benign type of crime than fraud for profit, but when those loans defaulted, everyone learned how dangerous this type of fraud truly is,” said Kevin Coop, president of Interthinx. “The crimes almost always include an inside party who is reaping a profit on the fraud. The industry must remain alert to shut down these schemes before loans are funded. That will go a long way toward helping our industry, and our country, recover.”

The full report is at http://www.interthinx.com/pdf/10_Q3MFRI_101810_FNL.pdf. The Mortgage Fraud Risk Report is an Interthinx information product created by an internal team of fraud experts. The report was prepared with input from Constance Wilson, Ann Fulmer, Shane De Zilwa, and the Interthinx analytics team. This is the sixth time Interthinx has released its quarterly report, which is providing deeper insight into current fraud trends through analysis of the extensive pool of data the company amasses from the industry’s use of the Interthinx FraudGUARD^® loan-level fraud detection tool.

For more information about the Interthinx Mortgage Fraud Risk Report, visit http://www.Interthinx.com.

About Interthinx

Interthinx, a Verisk Analytics subsidiary, is a leading national provider of comprehensive risk mitigation solutions in the areas of mortgage fraud, collateral valuation, regulatory compliance, audit services, and loss forecasting. The Interthinx quarterly Mortgage Fraud Risk Report is a standard for the financial services industry and includes analysis of national mortgage fraud risk with indices for the most common types of risk. At every point in the mortgage life cycle, the Interthinx suite of services can directly increase the value of client portfolios. Winner of Mortgage Technology magazine’s 10X Award, Interthinx is a charter participant in the national fraud prevention database MERS^® FraudALERT, a powerful utility that allows members of the mortgage industry to share data while maintaining privacy in a secure environment. For more information, visit www.interthinx.com or call 1-800-333-4510.