Interthinx Mortgage Fraud Risk Index Recedes in Q2

Fraud is a major concern for the mortgage industry, and it's become more prevalent over the past couple of years as perpetrators look for chinks in the armor to capitalize on deteriorated market conditions.

[IMAGE]

But a new study released by ""Interthinx"":http://www.interthinx.com this week indicates that mortgages are now less likely to involve fraud than they were during the first part of this year. The California-based company, which provides risk mitigation and fraud prevention tools to the mortgage industry, says its national mortgage fraud risk index declined 3 percent during the second quarter of 2010 when compared to the previous three months.

The chances of fraud among new mortgages, though, remains extremely elevated. Interthinx's Q2 reading is up 12 percent compared to the same period last year. Currently, the national fraud risk index is 145. A level of 100 is considered ""normal"" fraud risk.

[COLUMN_BREAK]

Interthinx says once mortgage fraud takes hold, it can prove difficult to eradicate. Communities that are currently struggling from the effects of fraudulent mortgage transactions will likely still be dealing with it years from now, the company says. Interthinx notes that six of the 10 riskiest metropolitan statistical areas (MSAs) in the nation were also in the top ten a year ago, and all 10 of the MSAs that were at the top of the list for fraud last year are still in the top 20 today.

Nevada edged up above Arizona to claim the highest risk for mortgage fraud in the nation during Q2. Interthinx says the high indices in Nevada and Arizona are due mostly to a disproportionately high refinance risk. Both states have indices about 40 points greater than that of third-place California.

California is home to seven of the 10 riskiest MSAs in Interthinx's study, with Modesto ranking the highest among metros nationally for the third consecutive quarter. Modesto has a fraud risk index of 285.

Interthinx's ZIP-code-level analysis showed Chicago to be one of the riskiest places in the country for mortgage fraud. ZIP code 60621 there had a risk index of 500.

Nationally, identity fraud proved to be an area of growing concern for mortgage originators. The identity fraud risk index climbed 10 percent quarter-over-quarter and is the only type-specific fraud to display a strong increasing trend over the last three quarters.

The occupancy fraud risk index fell 9 percent from the previous quarter, while the odds of property valuation fraud Risk dropped 4 percent.