Lower mortgage interest rates and rising refinance share led to an 11.4% annual decrease in the risk of fraud in mortgage applications in the second quarter, CoreLogic’s Mortgage Fraud Report shows.
It was the first time since the third quarter of 2016 that the risk of fraudulence decreased on an annual basis.
An estimated one in 123 mortgage applications, or 0.81% of all applications, contained indications of fraud in the second quarter, compared with one in 109, or 0.91% in the second quarter of 2018.
In general, applications for refinances have lower fraud rates than applications for purchases because borrower data has previously been collected and verified. So, as refinance share increases, the overall risk of fraud decreases.
New York, New Jersey and Florida remained the top three states for mortgage application fraud risk.
For the first time since 2017, New Jersey outpaced Florida and moved into the second highest position.
“The decrease in fraud risk mid-2019 appears temporary, based on unexpected interest rate drops and the resulting influx of low-risk refinance transactions,” says Bridget Berg, principal of fraud solutions strategy for CoreLogic, in a statement. “The absolute number of risky loans has not decreased but are simply part of a larger mortgage market at this time.”
Jumbo loans were the only loan type showing a risk increase in the second quarter.
Interestingly, the report shows that i-buyers – or companies that use technology to instantly make an offer on a home – accounted for more than 1% of all home sales in 2018 and are a contributing factor in the overall decline of fraud risk.