CoreLogic Reports Fraud Risk Among Mortgage Applications Declined 5.6 Percent in Second Quarter of 2013
September 25, 2013, Irvine, Calif. –
––Fraudulent Loan Applications Total Estimated $10.5 Billion in First Half of 2013––
CoreLogic® (NYSE: CLGX), a leading residential property information, analytics and services provider, today released its Mortgage Fraud Report showing that fraud risk among U.S. mortgage applications declined 5.6 percent year over year in the second quarter of 2013. According to the report, fraudulent residential mortgage loan applications totaled an estimated $5.3 billion nationally in the second quarter of 2013, down from $5.5 billion in the second quarter of 2012, but up slightly from $5.2 billion in the first quarter of 2013. Fraudulent loan applications reached a combined value of approximately $10.5 billion for the first half of 2013.
The analysis indicates that during the second quarter of 2013 approximately 19,700, or 0.8 percent, of mortgage applications were identified as having a high risk of fraud, down from 20,900, or 0.7 percent, in the second quarter of 2012. Quarter over quarter, fraudulent application volume remained relatively flat.
The CoreLogic Mortgage Fraud Report examines the collective level of fraud risk among mortgage applications at the national, state and Core Based Statistical Area (CBSA) levels. Developed using the company’s proprietary mortgage fraud data and predictive scoring technology, the report measures overall fraud activity based on the CoreLogic Mortgage Application Fraud Risk Index, as well as within six specific indexes: income, occupancy, employment, identity, property and undisclosed debt.
Among these six indexes, intentional misrepresentation of income on a mortgage application showed the greatest year-over-year increase in the second quarter of 2013 at 13.3 percent. Quarter over quarter, income application fraud risk increased 7.5 percent. Property fraud risk, or deliberate over- or under-valuing of a home to achieve illegitimate gains, showed the greatest decrease at 20.8 percent in the second quarter of 2013 compared to a year ago. On a quarter-over-quarter basis, property fraud risk decreased 7.1 percent.
“Since the beginning of 2012, mortgage application fraud risk has totaled more than $30 billion nationally,” said Dr. Mark Fleming, chief economist for CoreLogic. “While the propensity toward application fraud risk has declined based on our index, as the housing market recovers, the volume of mortgage applications is rising and increasing the total amount of fraudulent mortgage loan application dollars.”
Highlights as of Q2 2013:
- The total dollars of fraudulent mortgage loan applications increased in 27 states compared to a quarter ago.
- Ohio had the highest year-over-year growth in mortgage application fraud risk at 30.1 percent, followed by Hawaii (19.6 percent), Kentucky (16.6 percent), Connecticut (15.0 percent) and Alaska (13.8 percent). See Table 1 and accompanying chart.
- The five states with the highest estimated value of fraudulent mortgage applications were California ($864 million), New York ($278 million), Florida ($273 million), Texas ($261 million) and Virginia ($231 million).
- Of the 75 CBSAs analyzed, Allentown-Bethlehem-Easton, Pa. had the highest year-over-year increase in mortgage application fraud risk at 33.6 percent, followed by Honolulu, Hawaii (27.4 percent), Greenville-Mauldin-Easley, S.C. (26.8 percent), Rochester, N.Y. (22.9 percent) and Bridgeport-Stamford-Norwalk, Conn. (22.5 percent). See Table 2.
- The five CBSAs with the highest estimated value of fraudulent mortgage applications were New York, N.Y. ($339 million), Los Angeles, Calif.($337 million), Washington, D.C. ($226 milllion), Chicago, Ill. ($159 million) and San Francisco, Calif. ($156 million).
To view the full CoreLogic Mortgage Application Fraud Report, visit: http://www.corelogic.com/about-us/researchtrends/corelogic-mortgage-fraud-report.aspx. Additional CBSA-level data available by request.
Table 1: Fraud by State
Table 2: Top 25 CBSAs
The CoreLogic Mortgage Application Fraud Risk Index represents the collective level of fraud risk the mortgage industry is experiencing in each time period, as well as 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.
Annual mortgage application volumes are determined using the latest reported Home Mortgage Disclosure Act data. This data is used with CoreLogic proprietary loan-servicing contributed data to estimate the number of applications per origination by quarter and geography.
Additionally, CoreLogic Mortgage Fraud Consortium data provides an observed rate of fraudulent loan applications among consortium members. The number of expected fraudulent applications is estimated by applying the observed rate of fraud, adjusted by quarter and geography, and the fraud risk index 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.
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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 3.3 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.
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