CoreLogic Reports An 8.9 Percent Decrease In Mortgage Fraud Risk

Real Estate Industry and Trade Media

Bill Campbell
Campbell Lewis Communications
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Alyson Austin
Corporate Communications
CoreLogic
(949) 214-1414
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October 15, 2015, Irvine, Calif. –

—Florida Remains the State with the Highest Overall Fraud Risk; Louisiana Has the Largest YOY Increase in Fraud Risk—

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 2015, the report shows an 8.9 percent year-over-year decrease in fraud risk, as measured by the Mortgage Application Fraud Risk Index. For the twelve months ending the second quarter 2015, the report estimates the total value of applications with fraud or serious misrepresentations at $17.3 billion as compared with $19.8 billion a year ago.

The analysis found that during the second quarter of 2015, approximately 12,814 mortgage applications, or 0.67 percent of all mortgage applications, contained indications of fraud, as compared with the reported 11,100 or 0.69 percent in the second quarter of 2014.

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 Manager, a predictive fraud scoring technology. The national index is composed of six sub-indices that measure different types of mortgage application fraud: employment, identity, income, occupancy, property and undisclosed mortgage debt.

Among the highlights of the report:

  • The ten highest risk states in terms of mortgage fraud as measured by CoreLogic remained mostly stable:
    • Florida maintained its position as the nation’s highest risk state.
    • New York moved up to number two from number three in 2014.
    • Rhode Island fell out of the top ten, being replaced by the District of Columbia.
  • The state with the highest year-over-year growth in mortgage application fraud risk was Louisiana at 17 percent; Kansas had the largest decline at 35.2 percent.
  • Of the six components in the CoreLogic Mortgage Application Fraud Type Indexes, undisclosed mortgage debt risk showed the only increase at 1.7 percent; identity risk had the largest year-over-year decline at 22.7 percent.
  • As has been the case for the past five years, jumbo mortgages have exhibited the highest fraud risk, followed by low-down payment mortgages.

“New regulations, like Qualified Mortgage (QM) and Ability to Repay (ATR), as well as stricter credit overlays, have resulted in greater scrutiny of mortgage applications. Greater scrutiny, in turn, has had a positive impact on the rate of fraudulent applications,” said Susan Allen, senior vice president of Mortgage Analytics at CoreLogic. “In the markets where fraud remains strong, there are also significant inventories of distressed properties. Typically, this leads to large value discrepancies with nearby properties, which increases the risk of incorrect valuation, fraud-for-profit schemes, and occupancy fraud on properties recently converted to rentals.”

Top States with Highest YOY Risk Growth

Ten States with Highest Application Fraud Risk

25 METROPOLITAN AREAS WITH THE HIGHEST FRAUD RISK

Risk Rank

Core-Based Statistical Area

Year-Over-Year

Q2 2015 to Q2 2014

Quarter-Over-Quarter

Q2 to Q1 2015

1

Miami-Fort Lauderdale-West Palm Beach, FL

-9.1%

-2.9%

2

Tampa-St. Petersburg-Clearwater, FL

10.7%

4.8%

3

Orlando-Kissimmee-Sanford, FL

-5.4%

10.3%

4

North Port-Sarasota-Bradenton, FL

-4.6%

-11.8%

5

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

4.0%

8.8%

6

Jacksonville, FL

-4.4%

-18.2%

7

Las Vegas-Henderson-Paradise, NV

-19.5%

-6.4%

8

Urban Honolulu, HI

35.8%

82.7%

9

Los Angeles-Long Beach-Anaheim, CA

-10.2%

2.3%

10

Memphis, TN-MS-AR

-29.4%

1.9%

11

Oxnard-Thousand Oaks-Ventura, CA

-5.4%

2.8%

12

San Diego-Carlsbad, CA

-1.2%

14.9%

13

McAllen-Edinburg-Mission, TX

44.6%

92.4%

14

Chicago-Naperville-Elgin, IL-IN-WI

-16.3%

-6.0%

15

New Orleans-Metairie, LA

13.0%

5.9%

16

San Francisco-Oakland-Hayward, CA

-17.2%

9.5%

17

Tulsa, OK

54.1%

48.7%

18

Atlanta-Sandy Springs-Roswell, GA

-22.2%

-1.1%

19

Albuquerque, NM

-3.3%

3.6%

20

New Haven-Milford, CT

-5.8%

-9.0%

21

Riverside-San Bernardino-Ontario, CA

-12.9%

3.7%

22

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

2.0%

6.2%

23

Baltimore-Columbia-Towson, MD

-6.8%

20.8%

24

San Jose-Sunnyvale-Santa Clara, CA

-26.6%

-27.9%

25

Oklahoma City, OK

-32.1%

16.0%

To view the full CoreLogic Mortgage Fraud Report, visit corelogic.com/mortgagefraudreport. 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 1 point change in the index represents a 1 percent change in the share of mortgage applications

having a high risk of fraud. In previous reports, the national mortgage fraud index had a static weighted average across indexes computed for various loan segments. The static weighting method ensures that the changes in loan application volume between segments with different fraud characteristics do not spuriously indicate a change in fraud risk patterns.  Based on CoreLogic latest research findings, it has been deemed that the national trend is not susceptible to spurious change and the segment weighting has been adjusted quarterly to track market changes. 

The number of expected fraudulent applications is estimated by applying the rate of applications in the CoreLogic Mortgage Fraud Consortium data with high risk of fraud 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 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.

The application-fraud indexes are based on specific CoreLogic LoanSafe Fraud Manager alerts.  These alerts are computed consistently across time for all CoreLogic Mortgage Fraud Consortium members, regardless of whether the client has the alerts enabled or not.  Thus, increased firing of an alert indicates increased risk of the corresponding fraud type. Because the CoreLogic Mortgage Application Fraud Risk Index is based on the LoanSafe Fraud Manager score, it provides a more comprehensive and robust indication of fraud trends than would result from simply summing the fraud type indexes.

About CoreLogic

CoreLogic (NYSE: CLGX) is a leading global property information, analytics and data-enabled services provider. The company's combined data from public, contributory and proprietary sources includes over 4.5 billion records spanning more than 50 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, and the public sector. 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 North America, Western Europe and Asia Pacific. For more information, please visit www.corelogic.com.

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