NEW YORK – Sept. 20, 2017 – A growing share of purchase-money and wholesale lending has helped to push up the risk of mortgage fraud. Also contributing were jumbo refinances.

There was some indication of mortgage fraud on an estimated 13,404 applications for single-family loans during the second quarter of this year. That worked out to 0.82 percent of all residential loan applications that were submitted during the three-month period.

Deterioration was noted compared to the second-quarter 2016, when just 12,718 applications – or 0.70 percent – were estimated to contain mortgage fraud.

Those were some of the findings from CoreLogic Inc.’s Mortgage Fraud Report.

The year-over-year deterioration was “relatively large,” according to Bridget Berg, principal, Fraud Solutions for CoreLogic.

“If the factors that influenced the increase continue, including a shift to purchase transactions and growing wholesale channel origination activity, it is likely that mortgage application fraud risk will continue to rise as well,” Berg said in the report. “Fraud on cashout refinance transactions and home-equity loans may become more of a factor in the coming years as home values and equity rise.”

CoreLogic’s Mortgage Application Fraud Risk Index jumped 17 percent on a year-over-year basis.

One factor behind the increase was the growing share of purchase financing, which widened to two-thirds from 55 percent a year earlier.

“Purchase transactions have higher risk due to the stronger motivations and increased opportunities to commit mortgage origination fraud,” the report stated.

Another factor was an increase in the share of business generated through the wholesale lending channel, which has broadened to 7.3 percent from 5.0 percent in the second-quarter 2016.

By loan type, jumbo refinance transactions had the biggest increase in fraud risk. Risk in this category soared 59 percent even as volume dropped 35 percent.

The risk of occupancy fraud rose 7.0 percent from a year prior, while transaction fraud risk was up 3.9 percent, and income fraud risk increased 3.5 percent.

But property fraud risk retreated 1.9 percent, while undisclosed real estate debt fraud risk was down 2.7 percent, and identity fraud risk tumbled 7.3 percent.

New York had the highest level of application fraud risk during the most-recent period. New Jersey was next, followed by Florida, the District of Columbia and California.

Source: Florida Realtors