Report: Fraud Risk Tops Pre-Pandemic Levels
October 28, 2021
Mortgage fraud risk increased 37% through the first half of 2021 when compared to the same period last year, according to CoreLogic’s 2021 Mortgage Fraud Report.
The large increase follows a large drop seen in 2020-–a decrease driven mainly by the surge in traditionally low-risk refinances during the pandemic. The current risk level is similar to mid-2019.
The report showed that an estimated 0.83 % of all mortgage applications contained fraud, about 1 in 120 applications. This is an increase over the second quarter of 2020, where the estimate was 0.61 %, or about 1 in 164 applications. Risk in the purchase segment increased 6%, with investment properties driving the highest risk in both purchase and refinance populations.
“Refinance opportunities that surged lending volumes during the pandemic may be winding down,” said Ann Regan, executive, product management at CoreLogic. “The outlook is for fewer low-risk refinances compared to purchases and cash-out refinances, which translates to a higher-risk environment for fraud”
While most fraud types showed increased risk nationally, both income and property fraud risk decreased slightly, which aligns with the strong job market and home price growth.
- Nationally, most fraud types showed increased risk. Transaction risk showed an increase of 34.2% year-over-year. Income and property fraud risk decreased slightly, aligning with the strong job market and home price growth.
- The top five states for risk increases include: South Dakota, Washington, Alaska, Vermont and West Virginia. Less-populous states are more volatile due to lower levels of lending activity. These states all had below-average index values in 2020.
- Nevada moved into the top position for mortgage application fraud risk, with New York, Hawaii, Florida and California rounding out the top five.
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