Mortgage fraud was so rampant during the height of the housing bubble in the mid-2000s that real estate industry insiders started to refer to some mortgages as “liar’s loans.” While stricter regulations after the bubble burst and fines on mortgage lenders who knowingly approved fraudulent loans curbed the practice, CoreLogic, a real estate data firm, recently reported an uptick in mortgage fraud.
About one in every 109 mortgage applications was found to contain false or misleading information during the second quarter of 2018, an increase of 12.4 percent compared with the second quarter of 2017, according to CoreLogic. The states with the highest number of incidents of mortgage fraud during the quarter were New York, New Jersey and Florida. The metro areas with the biggest increase in mortgage fraud year-over-year were Oklahoma City, El Paso, Albuquerque, Spokane, Wash., and Springfield, Mass.
The most common types of fraud include:
• Income fraud, when someone misrepresents the amount of their income or its source or continuance.
• Occupancy fraud, when someone deliberately lies about whether they intend to live in their property as a first or second home or use it as an investment.
• Transaction fraud, when someone misrepresents undisclosed agreements between parties or falsified down payments.
• Property fraud, when someone misrepresents the property or its value.
• Undisclosed real estate debt, when an applicant doesn’t reveal other mortgage debt or liens or a foreclosure.
• Identity fraud, when someone uses a false identity or credit history.
The biggest jump in a specific type of fraud was income fraud, which was 22 percent higher in the second quarter of 2018 compared with the second quarter of 2017.
Analysts at CoreLogic attribute the rise in fraudulent applications to rising home prices and high demand for homes, which is pushing some borrowers to skirt the rules when applying for a loan. These fraudulent indicators represent loan applications, not loan approvals.
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