New data reveals a concerning uptick in mortgage fraud cases amidst subdued borrower demand.
The CoreLogic Mortgage Application Fraud Risk Index surged by 8.3% year-over-year in the second quarter of 2024, with a 1.1% increase from the previous quarter. The real estate data analysis firm attributes this rise to minimal changes affecting the risk factors in the mortgage market.
In Q2 2024, 0.81% of all mortgage applications (one in 123) were flagged for fraud, with purchase loans (0.9%) showing higher risk levels compared to refinances (0.58%).
CoreLogic found that applications from the U.S. Department of Veterans Affairs (VA) exhibited the lowest risk among loan types, consistent with previous years.
On analyzing transaction types, multiunit dwellings with two to four units were deemed riskier than single-family properties, with 3.5% of applications involving multiunit dwellings showing signs of fraud. Purchase transactions for these properties saw a 5% increase in fraud risk compared to Q2 2023.
Identity fraud and transaction fraud were identified as the two categories showing increased prevalence over the past year.
Identity fraud risk factors have been on the rise for two consecutive years, with a 5.5% increase in 2024 and a 12% increase in 2023. This trend is attributed to a growing number of loan programs for foreign nationals with Individual Tax Identification Numbers (ITIN) rather than Social Security numbers.
Transaction fraud risks have also shown consecutive increases, rising by 4.9% in 2024 and 1.9% in 2023. Factors such as rapid resales at higher prices, more active buyers, and transactions with multiple high-risk flags contribute to this trend.
CoreLogic’s state-by-state analysis highlighted heightened fraud activity in New York, Florida, California, Connecticut, and New Jersey, with double-digit percentage increases in fraud cases in California, Connecticut, and Florida since mid-2023.
Lending volumes have remained stable over the past year, attributed to sustained high interest rates. Refinance share in the market has shown minimal changes since mid-2022, hovering between 24% to 27.5%.
In 2023, there was a notable shift from conforming purchase loans to FHA-insured loans, a trend that did not continue into the current year.
Josh Wilson, CoreLogic’s primary fraud risk modeler for science and analytics, noted, “Fluctuations in the index are indicative of small changes in loan segments rather than large shifts in the lending environment.”