Led by an increase in new mortgage fraud cases along Florida’s coast, U.S. fraud activity has risen significantly since last year.
Reported incidents of mortgage fraud rose 42 percent from the first-quarter 2007 to the first-quarter 2008, Mortgage Asset Research Institute reported today.
MARI said its findings are based on data submitted by its 600 subscribers to the Mortgage Industry Data Exchange about their first-quarter originations that have since been classified as fraudulent. MIDEX contains an aggregation of reported incidents of fraud and verified misrepresentations. Its data cover 80 percent of U.S. wholesale originations.
Statistics compiled by MortgageDaily.com for the Fraudblogger.com Index indicated that active mortgage fraud cases nationally involved $1.005 billion in fraudulent loans during first quarter of this year, down 44 percent from the first-quarter 2007 — when there was a surge in activity. But second-quarter data indicated the level has jumped to $1.666 billion.
In today’s report, MARI said first-quarter 2008 fraud was worst in Florida, which accounted for 24 percent of all properties with material misrepresentation. The majority of Florida’s fraud occurred in coastal communities, with the Miami metropolitan statistical area responsible for almost half of fraud in the state.
California followed, with more than half of that state’s fraud occurring in the Los Angeles area. The third worst state level was shared equally by Illinois, Maryland and Michigan. The Chicago area accounted for 94 percent of Illinois’ fraud, while Detroit and surrounding areas were responsible for 56 percent of Michigan’s fraud.
Florida, with $103.7 million in active fraud cases during the first quarter, was also the worst state on the Fraudblogger.com Index. But Ohio was No. 2, at $109.8 million, then Georgia, at $163.8 million. Florida also had the most fraud in the second quarter, with $206.9 million in cases tracked, followed by Illinois, at $178.5 million, and California, which had $156.0 million.
California, Florida and Ohio had the most foreclosures of any state during the first quarter, RealtyTrac reported.
On a national basis, MARI noted first-quarter fraud was dominated by general application misrepresentation, closely trailed by income and employment misrepresentations.
The Reston, Va.-based firm said its Loan Fraud Alert Service Pro enables lenders and investors to identify potential application risk, patterns of fraud and hidden relationships among parties involved in mortgage transactions.
Appraisal misrepresentations were most prevalent in Michigan, and Maryland had an abnormally high share of tax return and financial statement fraud — at 69 percent.
“Pre-funding fraud detection solutions can help prevent the risk of application discrepancies, exposure to compromised identities and establishment of relationships with insiders who leverage someone’s good name to perpetrate fraud,” MARI stated. “If on the mortgage application general misrepresentation or income, appraiser or employer misrepresentation were checked adequately at origination and pre-funding, in this quarter’s examples, would there still be significant fraud to report as highlighted above?”
