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Interthinx: Mortgage Fraud Risk Climbs to Highest Level Since 2009

In the fourth quarter of last year, the risk of mortgage fraud elevated to the highest level since 2009, ""Interthinx"":http://www.interthinx.com/ reported Tuesday.


According to the company's ""Mortgage Fraud Risk Report"":http://www2.interthinx.com/MFRR_2012Q4, the mortgage fraud risk index climbed to 159, representing a 16 percent increase from Q3 2012 and 9 percent increase from Q4 2011.

Interthinx pinpointed the source of the increase to a surge in property valuation fraud risk, which rose 25 percent from Q3. Property valuation fraud occurs when property values are manipulated to create equity. Interthinx explained investor activity in recovering metro areas creates rapid price changes and opportunities for value manipulation.

The other types of fraud the index tracks are identity, occupancy, and employment/income.

Reflecting the national trend, the number of ""very high risk"" metros spiked from 70 in Q3 to an unprecedented 125 this quarter, the report revealed.


Five states contributed at least five more high risk metros to the list. Ohio bumped up the Q4 figure by adding 8 metros, the most out of any other state, while California, Georgia, and Michigan added 6, and South Carolina added 5 metros.

In addition, 26 states have at least one newly added ""very high risk"" metro not seen on the Q3 list.

In Q4, the riskiest metros were located in Florida or California, with Lakeland-Winter Haven recording the highest value, 292. Other metros in the top five were Merced, California (288); Tampa-St. Petersburg-Clearwater (286); Yuba City, California (285); and Jacksonville (285).

Florida and Nevada remained as the top two riskiest states after posting respective index values of 246 and 239. The other states identified in the top five were New Jersey, Connecticut, and Ohio. Historically high-risk states Arizona and California took the No. 7 and No. 8 spots, respectively.

States where risk levels decreased by at least 20 points year-over-year were mainly located east, while states that saw significant declines were largely concentrated west.

""Clearly, this report illustrates the reality that the mortgage industry is driven by trends at the state and metropolitan levels and that the will to commit mortgage fraud is not abating - it is simply shifting strategy to meet opportunity,"" said Jeff Moyer, president of Interthinx.

Interthinx says its indices are a proven leading indicator of default and foreclosure activity, so areas with high risk of fraud are likely to see high foreclosure rates. Looking ahead, Interthinx noted the states to watch closely are Florida, Nevada, California, Illinois and Ohio.

About Author: Esther Cho


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