The risk of mortgage fraud is higher in several areas of California than any other metropolitan areas of the country — pushing the risk of fraud in the Golden State higher than in any other state. In fact, the risk of property valuation fraud has more than tripled in four California areas — the worst in the country.
The risk of mortgage fraud on a national basis was up less than 1 percent from the prior quarter in the Q4 2009 Mortgage Fraud Risk Report from Interthinx. But the index, which came in at 273, was almost 1 percent lower than the prior year.
Agoura Hills, Calif.-based Interthinx, a provider of mortgage-fraud prevention services, noted that changes in its indices offer insight into future foreclosure activity.
California had the highest overall risk of fraud, increasing 61 percent from a year earlier to a 222 index. Nevada’s 220 index followed — then Arizona’s 200. No. 4 was Florida, then Colorado.
Nevada had topped the ranking for the last five consecutive quarters, but Interthinx noted that several metropolitan statistical areas were added to the highest-risk category. The highest indices among MSAs were in Modesto, Calif., at 303; Stockton, Calif., with 297; and Vallejo-Fairfield, Calif., also with a 297 index.
Occupancy fraud risk was 16 percent higher than the prior quarter but 14 percent lower than 12 months ago. Interthinx warned that this is an area of concern due to the magnitude of the increase “as continuing price declines and ‘get rich quick’ schemes lure investors back into the market and as builders face continuing difficulty in moving unsold inventory.”
The risk of occupancy fraud skyrocketed 383 percent from a year age in Reading, Pa., while it was up 172 percent from the prior quarter. The Miami-Fort Lauderdale-Pompano Beach, Fla., area also ranked high here.
The risk of appraisal fraud fell 4 percent, based on Interthinx’s Property Valuation Fraud Risk Index. Still, the risk was 40 percent worse than a year ago and more than double the level two years ago.
“Schemes involving short sales, REO inventories, ‘wholesale’ flipping and refinancing by borrowers whose equity has been impaired by falling real estate values continue to drive this index.,” Interthinx explained. “While interest rates remain low, the predominant fraud type will continue to be related to property valuation.”
The risk of property valuation fraud was highest in California areas like Modesto, Stockton and the Inland Empire — where it was up more than 200 percent from a year ago. The risk was 446 higher in Vallejo-Fairfield, Calif.
Down 29 percent from a year ago was the national risk of employment and income fraud — though it was 3 percent higher than the previous quarter. It was the first year-over-year decline since late 2008 and was attributed to the elimination of alternative-documentation programs, increased housing affordability and wider use of electronic verifications from the Internal Revenue Service.
Employment fraud was most likely in Santa Barbara-Santa Maria-Goleta, Calif., where the risk has increased by nearly half over the past year and was up 86 percent from the prior quarter.
The risk of U.S. identity fraud was off 2 percent from the third quarter and down 4 percent from the fourth-quarter 2008. The top five metropolitan areas were concentrated in the Southeast.
