CoreLogic Releases 2010 Mortgage Fraud Trends Report

Key Contacts

Investor Contact

Dan Smith
Investor Relations
CoreLogic
(703) 610-5410
Email Dan Smith

Media Contact

Alyson Austin
Corporate Communications
CoreLogic
(949) 214-1414
newsmedia@corelogic.com

July 14, 2010, SANTA ANA, Calif. –

CoreLogic (NYSE: CLGX), a leading provider of consumer, financial and property information and business services, today announced the release of its 2010 Mortgage Fraud Trends Report, a detailed analysis of US mortgage fraud rates and trends. The full report can be downloaded by visiting www.corelogic.com/fraudindex and will be updated on an annual basis.

The CoreLogic Fraud Index™ shows that fraud risk in the mortgage industry has declined by 25 percent since it peaked in the third quarter of 2007. The CoreLogic Fraud Index also found significant trends in mortgage fraud types and loan performance including an estimated one in 200 conforming loan applications during this period contained misrepresentations in the file that could lead to default. CoreLogic produced this first ever predictive and statistical Fraud Index to look at the aggregated level of risk each quarter and compared it to other quarters in a specific time period. For this report, CoreLogic analyzed a representative data sample from its 80 million loan applications from 2005 through 2009, and used a predictive fraud model based on pattern recognition to determine the level of fraud risk by each quarter.

“Lenders’ aggressive stance against fraud is having an impact. Our 2010 Fraud Index indicates that mortgage fraud risk is on the decline. But with an estimated $14 billion in fraud losses experienced in 2009 alone, fraud is still a major issue for the mortgage industry,” stated Tim Grace, senior vice president of Fraud Analytics, CoreLogic. “While the industry has done good work there is evidence that fraud patterns are changing and becoming increasingly better hidden. By sharing fraud patterns with each other through CoreLogic fraud consortium members’ meetings and by statistical pattern recognition fraud scoring, lenders can help stay on top of these new trends and keep risk down.”

Another key finding from the report was the fact that there is a high correlation between fraud risk and subsequent default rates. The CoreLogic Fraud Index can also be a leading indicator of future default issues. For example, of the top 12 highest ranking CoreLogic Fraud Index states in 2007, nine were in the top 12 highest ranking default states in 2009, according to the index.

CoreLogic Fraud Index Highlights

  • Overall mortgage fraud risk, including subprime loans, has been steadily decreasing since 2006 and appears to have leveled off in 2009.
  • Recognition of mortgage fraud is up in the industry overall. Lenders are acknowledging the existence of fraud in their portfolios and reporting more fraudulent loans than they have in the past. On average, lenders are reporting 55 basis points of fraud on conforming loans, and 122 basis points of fraud on Federal Housing Administration (FHA) loans.
  • The Fraud Index with subprime mortgage data removed found that mortgage fraud among prime lending was still on the rise through the third quarter of 2007, even when many of the largest subprime lenders were going out of business.
  • Short sale volume from first quarter of 2008 through fourth quarter of 2009 increased by more than 300 percent.
  • Nearly one in every 200 short sales were deemed “very suspicious” by lenders, meaning there was a new sale transaction less than 60 days after the short sale and the sale price was more than 20 percent higher than the short sale price.
  • The most common types of fraud experienced by lenders were:
  • Type of Fraud Percent of Lenders Who Identified This as Top Cause of Fraud
    Income 31.0
    Identity 12.6
    Internal Fraud 16.8
    Occupancy 11.4
    Property 10.3
    Employment 8.1
    Undisclosed Debt 4.0
    Third Party 2.8
    Assets 2.7

CoreLogic has the ability to segment the Fraud Index risk by major fraud type and geographic region. This is significantly beneficial in assisting

lenders to understand the risks of doing business in certain areas. For example:

  • Income stratification found unexpected areas of fraud risk concern in Wyoming in addition to well-known high-risk areas such as California and Georgia.
  • Identity stratification confirmed that Arizona, a leader in credit card identity fraud, is also at high-risk for identity fraud in the mortgage industry.
  • The Midwest and East Coast represent a significant risk for employment and undisclosed debt fraud.
  • Reported home equity line of credit (HELOC) fraud is highly concentrated in California. Hot spots include Glendale, Pasadena, North Hollywood and San Jose. Multi-lien fraud was attributed as one of the fastest growing fraud HELOC schemes.
  • The Fraud Index is able to identify patterns and clusters of fraud and group them at the state level. Florida, South Carolina, North Carolina, California and Georgia are the highest ranking states for mortgage fraud.
  • The Fraud Index can also be broken down to a more meaningful ZIP3 (SCF) level as not all areas within a high-risk state present the same level of risk. Some ZIP3’s have three to four times the fraud risk of the national average. The highest risk ZIP codes are: Jamaica, N.Y., Orlando, Fla., Miami, Fla., Atlanta, Ga., and Detroit, Mich.
  • The Fraud Index can even be broken down to the individual street level. The top scoring street was in Orlando, Fla.
  • Lenders and mortgage loan officers can have different Fraud Index levels. A lender’s fraud risk can vary based on their loan program, policies, geographic footprint and pre-fund fraud prevention processes.

About CoreLogic

CoreLogic is a leading provider of consumer, financial and property information, analytics and services to business and government. The company combines public, contributory and proprietary data to develop predictive decision analytics and provide business services that bring dynamic insight and transparency to the markets it serves. CoreLogic has built the largest and most comprehensive U.S. real estate, mortgage application, fraud, and loan performance databases and is a recognized leading provider of mortgage and automotive credit reporting, property tax, valuation, flood determination, and geospatial analytics and services. More than one million users rely on CoreLogic to assess risk, support underwriting, investment and marketing decisions, prevent fraud, and improve business performance in their daily operations. Formerly, the information solutions group of The First American Corporation, CoreLogic began trading under the ticker CLGX on the NYSE on June 2, 2010. The company, headquartered in Santa Ana, Calif., has more than 10,000 employees globally with 2009 revenues of $2 billion. For more information visit www.corelogic.com.

CoreLogic is a registered trademark of CoreLogic, Inc.