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California Leads Mortgage Fraud Risk in Q1

Mortgage fraud risk edged up slightly in the first quarter of 2013, ""Interthinx"":http://www.interthinx.com/ revealed in its latest quarterly Mortgage Fraud Risk Report.


The report, created by an internal team of fraud experts, offers an analysis of the more than 12 million loan applications amassed from industry use of Interthinx's FraudGUARD loan level fraud detection tool.

According to the company's findings, first-quarter mortgage fraud risk was up 1 percent over last quarter and was unchanged from the same quarter in 2012.

California was the riskiest state in the nation, boasting a mortgage fraud risk index of 125. In addition, four of the top 10 riskiest ZIP codes and five of the top 10 riskiest metropolitan statistical areas (MSAs)--including Santa Barbara-Santa Maria-Goleta, the top riskiest metro--call the Golden State home.

The Chicago-Naperville-Joliet MSA also proved to be risky last quarter, housing an additional four of the top 10 riskiest ZIP codes in the country.


In terms of risk type, occupancy fraud risk ranked No. 1, with an index reading of 115. Property valuation fraud risk was next (with an index of 109), followed by employment/income fraud risk (90) and identity fraud (85). The top two risk types saw their indexes increase both quarter-over-quarter and year-over-year; the bottom two experienced declines all around.

""Although occupancy fraud risk is up nationwide, different areas of the country are at risk for different types of fraud risk,"" noted Ashley Woodworth, VP of business development and corporate strategy at Interthinx. ""With the continuing trend for mortgage fraud to 'head east,' states like Illinois and Ohio have shown increases in property valuation fraud risk.""

The report also shows that purchase mortgages have a higher fraud risk than refinances, with index values of 118 and 88, respectively. In addition, 10 states are in the ""very high risk"" category (with index values of 125 or greater) when considering only purchase mortgages. When considering only refinances, not even one state is classified as ""very high risk.""

According to Interthinx, the main driver behind purchase fraud risk is its much higher occurrence of occupancy fraud. The Occupancy Fraud Risk Index for purchases is 176 compared to only 76 for refinances. The higher risk chance is ""likely due to the relative difficulty in falsifying owner-occupancy status when applying for a refinance as opposed to a purchase,"" the company said.

""Clearly, this report illustrates that loan purpose is a pivotal factor in occupancy fraud risk,"" said Interthinx president Jeff Moyer. ""The higher occupancy fraud risk in purchases will become increasingly significant as the mortgage market changes in the coming months from a refinance-dominated market to a purchase-dominated market.""


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