Mortgage Fraud on the Rise as Buyers Scramble to Land Homes
May 22, 2017 | Administrator
The frequency of defects, fraudulence and misrepresentation in the information submitted in mortgage loan applications increased 3.9 percent in March 2017 as compared with the previous month.
Firse American’s Defect Index for purchase transactions increased 2.4 percent compared to last month, and is up 3.6 percent compared to a year ago.
“This month, the Loan Application Defect Index continued to trend upward as the risk on refinance and purchase transactions both increased compared to a month ago,” said Mark Fleming, chief economist at First American. “After four consecutive months of increased defect risk, it’s fair to call this a trend.
“We are experiencing one of the strongest sellers’ markets in recent memory and the ‘speed-buying’ that is required for home buyers to make an offer and win a bid for homes they like may be contributing to the increase in defect, misrepresentation and fraud risk that we are observing,” said Fleming.
“Defect, fraud and misrepresentation risk is increasingly becoming a regional phenomenon. The risk is concentrating in attractive local markets where housing demand is the strongest, primarily in the South,” said Fleming. “The South may not be so charming anymore if you manage loan fraud and misrepresentation risk.”
The riskiest markets are increasingly in the South, with elevated risk stretching from Texas to Florida and up to West Virginia. “Conversely, the Northeast has remained consistently low risk. The markets with the lowest level of defect, fraud and misrepresentation risk in the country are Scranton, Pa.; Toledo, Ohio; Rochester, N.Y.; Albany, N.Y.; and Harrisburg, Pa, Fleming said.
According to the most recent National Association of Realtors (NAR) existing-home sales release, the rate of existing-home sales increased 8.5 percent in March compared to a year ago. Additionally, the median price in the South was up 8.6 percent compared to a year ago.