CoreLogic Reports a 3.2 Percent Rise in Mortgage Fraud Risk

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October 28, 2014, Irvine, Calif. –

—Newly Released Mortgage Fraud Report Identifies Florida as the State with the Greatest Increase in Fraud Risk; Arizona with the Greatest Decline—

CoreLogic® (NYSE: CLGX), a leading global property information, analytics and data-enabled services provider, today released its latest Mortgage Fraud Report. As of the end of the second quarter of 2014, the report shows a 3.2 percent year-over-year increase in fraud risk, as measured by the Mortgage Application Fraud Risk Index, and estimates that applications representing approximately $3.3 billion in mortgage debt contained elements of fraud or serious misrepresentations in the second quarter of 2014. For the twelve months ending the second quarter 2014, the report estimates the total value of applications with fraud or serious misrepresentations at $19.8 billion.

The analysis found that during the second quarter of 2014, approximately 11,100 mortgage applications, or 0.69 percent of all mortgage applications, contained elements of fraud, as compared with 19,700 or 0.67 percent in the second quarter of 2013, when the total application volume was substantially higher.

The CoreLogic Mortgage Fraud Report analyzes the collective level of loan application fraud risk throughout the mortgage industry. The CoreLogic Mortgage Application Fraud Risk Index is based on residential mortgage loan applications processed by CoreLogic LoanSafe Fraud ManagerTM, which includes a predictive fraud scoring technology. The report includes detailed data for six application fraud type indices that complement the national index: employment, identity, income, occupancy, property and undisclosed debt.

Among the highlights of the report:

  • Nationally, Florida experienced the highest year-over-year growth in mortgage application fraud risk; Arizona experienced the largest decline.
  • Of the six components in the CoreLogic Mortgage Application Fraud Type Indexes, property fraud risk had the largest year-over-year percentage increase at 3.3 percent; undisclosed debt risk showed the largest year-over-year decline at 22.7 percent.
  • As has been the case for the past four years, jumbo mortgages have exhibited the highest fraud risk, followed by low-down payment mortgages.

The year over year differences are likely driven to some extent by changes to market conditions including:

  • New government programs—notably the "ability to repay" rules that went into effect last January—that have placed additional scrutiny on debt and irregular income such as bonuses and rental payments;
  • Over 3.2 million additional single-family properties added to the rental market since 2006, increasing both the potential for occupancy fraud as well as the number of consumers showing rental income and multiple mortgages.
  • Deferred maintenance for some properties and rapid appreciation for others leading to large discrepancies in value among nearby properties, increasing opportunities for incorrect valuation and fraud-for-profit schemes. This was most often the case in judicial foreclosure states and high vacancy areas.

“Increasing home values have improved home equity, enabling many homeowners with previously marginal equity to purchase a different property, refinance, or obtain a cash-out home equity loan or HELOC,” said Michael Bradley, Ph.D., senior vice president of Analytics at CoreLogic.  “Also, job creation, as well as the aging of negative credit report records from the beginning of the recession, have increased the number of consumers able to qualify for mortgages.  Finally, more institutions are beginning to rely on advanced analytics to relax credit overlays and expand the credit envelope. All of these trends have expanded access to mortgage credit modestly with only a slight increase in fraud risk, as the CoreLogic Mortgage Fraud Report indicates.”

Mortgage Fraud Risk By State as of 2Q 2014
12-Month Mortgage Application Fraud Index Change 

Mortgage Fraud Risk by State as of 2Q 2014

Mortgage Fraud Risk for Top 25 Largest Metropolitan Areas (Based on Population)

CBSA

YEAR-OVER-YEAR GROWTH RATE

QUARTER-OVER-QUARTER GROWTH RATE

Atlanta-Sandy Springs-Roswell, GA

-19.8%

-13.2%

Baltimore-Columbia-Towson, MD

5.2%

-13.7%

Boston-Cambridge-Newton, MA-NH

-15.2%

-18.6%

Charlotte-Concord-Gastonia, NC-SC

-7.8%

-12.2%

Chicago-Naperville-Elgin, IL-IN-WI

30.6%

-1.7%

Dallas-Fort Worth-Arlington, TX

-14.3%

-12.7%

Denver-Aurora-Lakewood, CO

-24.3%

-2.5%

Detroit-Warren-Dearborn, MI

-14.2%

4.7%

Houston-The Woodlands-Sugar Land, TX

-15.1%

-7.9%

Los Angeles-Long Beach-Anaheim, CA

17.6%

-0.9%

Miami-Fort Lauderdale-West Palm Beach, FL

113.2%

13.2%

Minneapolis-St. Paul-Bloomington, MN-WI

-20.6%

-20.7%

New York-Newark-Jersey City, NY-NJ-PA

59.3%

11.1%

Philadelphia-Camden-Wilmington, PA-NJ-DE-MD

25.4%

-2.4%

Phoenix-Mesa-Scottsdale, AZ

-31.9%

-11.8%

Pittsburgh, PA

52.6%

26.8%

Portland-Vancouver-Hillsboro, OR-WA

-9.9%

-11.2%

Riverside-San Bernardino-Ontario, CA

-13.7%

-10.9%

San Antonio-New Braunfels, TX

-8.3%

-2.9%

San Diego-Carlsbad, CA

4.0%

4.2%

San Francisco-Oakland-Hayward, CA

2.8%

-0.8%

Seattle-Tacoma-Bellevue, WA

-12.5%

2.9%

St. Louis, MO-IL

-16.7%

-14.4%

Tampa-St. Petersburg-Clearwater, FL

61.2%

10.6%

Washington-Arlington-Alexandria, DC-VA-MD-WV

-24.8%

-16.1%

To view the full CoreLogic Mortgage Fraud Report, visit http://www.corelogic.com/about-us/researchtrends/corelogic-mortgage-fraud-report.aspx. Additional CBSA-level data available by request.

Methodology

The CoreLogic Mortgage Application Fraud Risk Index represents the collective level of fraud risk the mortgage industry is experiencing in each time period, based on the share of loan applications with a high risk of fraud. The index is standardized to a baseline of 100 for the share of high-risk loan applications nationally in the third quarter of 2010. Each one point change in the index represents a one percent change in the share of mortgage applications having a high risk of fraud. The national mortgage fraud index is a weighted average across indexes computed for 12 separate loan type segments such as high LTV owner-occupied purchase and conforming investment refinance.  This methodology ensures that changes in loan application volume between segments with different fraud characteristics do not spuriously indicate a change in fraud patterns.

The number of expected fraudulent applications is estimated by applying the rate of applications with high risk of fraud in the CoreLogic Mortgage Fraud Consortium data, normalized to past reports of actual mortgage fraud volume by the US government, to the estimated loan application volume in each quarter and geography. Expected fraudulent mortgage applications are defined as having a high risk of fraud based on the CoreLogic LoanSafe Fraud Manager score.

CoreLogic Mortgage Fraud Consortium data also provides the average application loan amount by quarter and geography for high-risk fraud scores based on the CoreLogic LoanSafe Fraud Manager score. The average loan amount for applications with a high risk of fraud combined with the number of expected fraudulent applications is used to determine the expected total fraudulent application loan amount by quarter and geography.

About CoreLogic

CoreLogic (NYSE: CLGX) is a leading property information, analytics and services provider in the United States and Australia. The company’s combined data from public, contributory and proprietary sources includes over 3.5 billion records spanning more than 40 years, providing detailed coverage of property, mortgages and other encumbrances, consumer credit, tenancy, location, hazard risk and related performance information. The markets CoreLogic serves include real estate and mortgage finance, insurance, capital markets, transportation and government. CoreLogic delivers value to clients through unique data, analytics, workflow technology, advisory and managed services. Clients rely on CoreLogic to help identify and manage growth opportunities, improve performance and mitigate risk. Headquartered in Irvine, Calif., CoreLogic operates in seven countries. For more information, please visit www.corelogic.com.

CoreLogic and the CoreLogic logo are trademarks of CoreLogic, Inc. and/or its subsidiaries.