Mortgage Fraud to Increase over Next Three Years, Report Says

August 27, 2009

Mortgage fraud is expected to increase over the next three years as a large number of adjustable rate mortgages (ARMs) reset between now and the first quarter of 2012, according to a quarterly fraud index by Interthinx.

Interthinx reported its national fraud index is down 4 percent from first-quarter 2009 and up 7 percent from second-quarter 2008. The firm said valuation fraud — the most common type of mortgage fraud — is up 56 percent, but occupancy fraud and employment/income fraud declined 25 percent and 33 percent, respectively.

Interthinx said fraud risk is an indicator of foreclosure risk, meaning areas with high fraud risk are in danger of seeing increased foreclosures within two years.

Western states lead the country in fraud risk, as eight out of the top 10 riskiest metropolitan statistical areas (MSA) are located in California. Las Vegas and Reno Nevada are the only non-California cities in the top 10. The Stockton, Calif. MSA topped the list with a fraud index of 257 — where 100 is considered “normal” — up nearly 20 percent from the first quarter of 2009 and up 72.3 percent from Q2 2008.

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