Florida Still Leads in Mortgage Fraud

Allison Tussey —  December 15, 2014 — 1 Comment

Based on incident reports, Florida’s Mortgage Fraud Index ranked first in the nation for loans investigated in 2013. Florida’s reported fraud rate, 529, is over five times the expected rate of fraud for the state, based on its origination volume. It is over five times that of California for investigated loans.

LexisNexis® has released its 16th Annual Mortgage Fraud mortgage-fraud-report-2014, formerly known as the Mortgage Asset Research Institute Fraud Report. A summary of the findings show that Florida still leads for mortgage fraud incidents.

The LexisNexis examination of 2013 data identified that:

Florida’s LexisNexis® Mortgage Fraud Index (MFI) ranked first in the nation for loans investigated in 2013. The MFI is an indication of the amount of mortgage-related fraud and misrepresentation involving industry professionals found through LexisNexis® Mortgage Industry Data Exchange (MIDEX®) subscriber fraud investigations in various geographical areas within any particular year. Florida’s reported MFI of 529 is more than five times the expected rate of fraud for the state, based on its origination volume.

2013 is the only year Utah has been in the top 10 during this five-year study. In 2009, 2010, 2011, and 2012 the Utah MFI was below 100.

209 is New Jersey’s highest MFI during this five-year period. It is more than double the state’s 2011 MFI of 86. Illinois and New York also saw higher MFIs in 2013 than in previous years.

Properties in five Metropolitan Statistical Areas (MSAs)—Miami, Chicago, New York, Phoenix, and Orlando—make up a combined total 37.3 percent of all the loans investigated in 2013.

Application fraud and misrepresentation has been climbing steadily over the past three years. Seventy-four percent of loans reported in 2013 involved some kind of fraud or misrepresentation on the loan application. In 2012, that number was 69 percent; and in 2011, 61 percent.

The most notable increase for loans investigated in 2013 is for fraud and misrepresentation on credit documentation. This type of fraud, involving misrepresentation on the credit report or with credit history or references, increased to 17 percent in 2013 from five percent in 2012.

Reported fraud on appraisals and property valuations was at a five-year low in 2013. Only 15 percent of loans reported in 2013 included these issues, compared to 26 percent in 2012, 31 percent in 2011, 33 percent in 2010, and 31 percent in 2009.

Alabama, Louisiana, Pennsylvania, New York, New Jersey, Kentucky, and California rank in the top 10 for both CII lists.

The most noticeable new state with a high percentage of potential nonarm’s length transaction activity is California. Prior to 2013, California has not previously been in the top 10. California is ranked ninth in the listing of properties transferred with a 20 – 95 percent loss (CII of 141) and sixth in the listing of properties transferred with a 50 – 95 percent loss (CII of 184).

Four states experienced CII decreases in both category lists: Pennsylvania, New York, New Jersey, and Kentucky. While remaining in the 2013 top 10, their CIIs all fell below 200.

The body of the report presents the data and analysis supporting the findings cited above. The information contained in this report is meant to provide insights into current mortgage industry activities.

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Allison Tussey

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