National Mortgage Fraud Remains Relatively Steady, Shifts Regionally

On a national level, mortgage fraud risk has declined 2.3 percent over the year but has remained relatively steady for the last five quarters, according to ""Interthinx's Second-Quarter Mortgage Fraud Risk Report."":http://www.interthinx.com/pdf/11_Q2MFRR_FNL.pdf

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National mortgage fraud declined 1 percent from the previous quarter.

The top three states in order of ranking were Nevada, Arizona, and California. Nevada and Arizona held the same rankings the previous quarter.

Other states designated ""very high risk"" were Florida, Colorado, Michigan, and Ohio.

Interthinx traditionally measures fraud risk at national and state levels, by ZIP codes, and by metropolitan statistical areas (MSA). The second-quarter report is the first to also measure risk types without geographic constrictions.

Two Chicago ZIP codes have alternately held the top spot on the Interthinx ZIP code chart for four consecutive quarters. However, the two Chicago ZIP codes fell significantly in fraud rankings and are no longer on the top 20 list of riskiest ZIP codes.

""The Mortgage Fraud Risk Report has been drawing attention to Chicago for a year, and the recent decrease in mortgage fraud risk in the Chicago ZIP codes was as dramatic as it was sudden,"" said Kevin Coop, president of Interthinx.

""It suggests that when the industry has actionable intelligence and increases its scrutiny of an area, word gets out, and the fraudsters move on,"" Coop said.

In fact, Coop said, ""It's exactly what we expect to accomplish with this report.""

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With Chicago falling from the top of the charts, a Miami ZIP code took its place it the No. 1 spot. Two other Miami ZIP codes were also listed in the top 10 riskiest ZIP codes.

Miami also ranked No. 1 for identity fraud risk, No. 2 for occupancy fraud risk, and No. 9 for property valuation fraud risk.

Florida in general did not fare well in the report. Five of the 10 top riskiest ZIP codes and eight of the top 20 were located in Florida.

Of the metropolitan statistical areas (MSA), Stockton-California was ranked the most risky with double the risk recorded nationally.

The top three spots on the MSA chart, and five of the top 10, were held by California MSAs.

Interthinx's nongeographic fraud risk analysis found that investor loans are riskier than owner-occupants.

Investor applications held three times the risk for employment/income fraud.

Another factor that correlated to fraud risk was loan amount. As loan amount increased, so did risk of occupancy and employment/income fraud.

Following the Interthinx report Thursday, the FBI released its annual mortgage fraud report Friday stating that mortgage fraud remained elevated in 2010.

The FBI reported that fraud was often instigated by industry participants â€" from agents and brokers to underwriters, appraisers, developers, and settlement attorneys.

In addition, the FBI reported “numerous instances in which various organized criminal groups were involved in mortgage fraud activity.”

These criminal groups were largely from overseas and tended to participate in short sale and loan origination fraud.

“The current and continuing depressed housing market will likely remain an attractive environment for mortgage fraud perpetrators who will continue to seek new methods to circumvent loopholes and gaps in the mortgage lending market,"" the FBI said.

The report continued: ""These methods will likely remain effective in the near term, as the housing market is anticipated to remain stagnant through 2011.""