Mortgage Fraud Reports Down 41%, Says LexisNexis Research
By: Carrie Bay
Incidents of fraud and material misrepresentation reported by mortgage industry professionals during the 2010 calendar year were down 41 percent compared to the previous 12 months, according to data released Monday by the LexisNexis Mortgage Asset Research Institute.
It’s the first time in five years a decrease has been recorded, but the company says it does not necessarily correlate to a decline in actual occurrences of mortgage fraud, which are still rising based on the number of Suspicious Activity Reports (SARs) submitted to the Treasury’s Financial Crimes Enforcement Network (FinCEN).
FinCEN estimates losses related to mortgage fraud in 2010 at more than $1.5 billion, a total that LexisNexis says “is still likely to be grossly under-reported.”
The latest decline in fraud cases reported to the LexisNexis Mortgage Asset Research Institute brings the number of cases in 2010 to the same level as the number of reported cases in 2006.
LexisNexis says the statistical decrease is believed to be attributed to several factors, including a decrease in loan
origination volumes in 2010 to just over a trillion dollars, fewer resources available to investigate and report fraud incidents.
Florida retains its title as the state with the most reported occurrences of mortgage fraud, based on the index from the Mortgage Asset Research Institute. The Sunshine State has just over three times the expected amount of reported mortgage fraud for its origination volume.
New York remained in second place among the states when looking at the number of reported fraud cases, followed by California in third.
LexisNexis warns that depreciated property values and the threat of homeownership uncertainty have opened new doors for fraudsters to evolve their craft.
The company says misrepresentation on loan applications and verifications of deposit, along with appraisal and valuation issues, were the most blatant fraud problems in 2010, however, multiple industry reports indicate that identity-, bankruptcy- and income-related frauds are on the rise.
“Mortgage fraud has become more complex and harder to verify using traditional methods,” said Denise James, director of real estate solutions for LexisNexis Risk Solutions and co-author of the report.
“Mortgage businesses are quickly trying to implement new procedures to detect emerging frauds while, at the same time, focusing their energies on recovering the huge financial losses of recent years,” James said.
The LexisNexis report shows that in 2010 alone, the FBI filed 1,531 indictments and received 970 convictions related to mortgage fraud. Through the end of February 2011, the agency reports 3,020 pending investigations, 72 percent of which involve losses of more than $1 million.
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