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States and metro areas known for being risky when it comes to mortgage fraud seem to be repeat offenders, according to the ""2011 Annual Mortgage Fraud Risk report"":http://www.interthinx.com/pdf/11_MFRR_Annual_FNL.pdf released by ""Interthinx"":http://www.interthinx.com/.
[IMAGE]The top six states with the highest levels of mortgage fraud risk in 2010 maintained their spots as the riskiest states into 2011, a trend also seen when looking at data for fraud in Metropolitan Statistical Areas (MSAs).
""This alarming degree of persistence suggests that it is going to be a long road back for these MSAs and states,"" the report stated.
Nevada, Arizona, Florida, California, Colorado, and Michigan were the six riskiest states for 2011 and 2010, while Kansas, West Virginia, Maine, and South Dakota retain their bottom four positions as the least risky states when it comes to mortgage fraud.
For the riskiest MSAs, the top 20 metros are all located in the top four riskiest states, and 16 of the 20 MSAs made the list last year.
The top three spots are all based in California, with Merced as number one, and Stockton and Modesto in the next two spots.
Las Vegas, which held the number 3 spot last year, is at number four for 2011, while Phoenix claims number five, a climb from the number 10 spot it held last year.
[COLUMN_BREAK]California metro Vallejo-Fairfield went from number four last year to number 14 this year.
According to the report, a strong correlation exists between regions with mortgage fraud risk and high levels of distress such as foreclosures.
For example, Nevada, with the highest levels of fraud risk, has a foreclosure activity rate of 6.25 percent and experienced a 54 percent decline in home prices, according to the report. Similarly, Arizona is the second riskiest state and has a foreclosure rate of 4.14 percent and saw house prices drop 43 percent.
The report does point to exceptions to this correlation and uses Idaho as an example. The state has a low level of fraud risk despite large declines in home values and high foreclosure rates.
The top 20 riskiest ZIP codes were also listed in the report. The top two ZIP codes represented Michigan locations Keego Harbor and Detroit, with the third ZIP code based in Miami.
Last year, four of the top 20 ZIP codes were located in Chicago, but this year, Chicago ZIP codes were absent from the list. According to the report, the high fraud risk pockets in Chicago received extensive media coverage during the first half of 2011, and the increased scrutiny may have played a role in the reduction.
The report also noted a 14 percent increase in employment/income fraud risk during 2011, and a 45 percent increase over the past two years. According to the report, the rise in employment/income fraud is likely the result of income levels slipping more than house prices, combined with tighter lending standards. Also, loan applications for investment properties have a very high fraud risk compared with applications for primary residences.
Employment/income fraud is done primarily through falsely stated income and low- and no-document loan programs. Interthinx explained that this type of fraud is what enabled millions to take out loans outside of their financial means, which eventually led to the housing crises.
