Mortgage fraud risk increased 8.2% year-over-year in the third quarter, with an estimated 1 in 118 mortgage applications showing indications of fraud, according to Cotality’s latest National Mortgage Application Fraud Risk Index report.
Undisclosed real estate fraud was the only fraud category to increase in the third quarter, rising 9.1% year-over-year. Undisclosed real estate fraud includes undisclosed debt, possible occupancy misrepresentation, and/or derogatory credit events (foreclosure, NOD, short sale, etc.) being hidden from the lender.
The increase in undisclosed real estate fraud could be due to the rise in investors and more people being forced to rent because of high home prices and mortgage rates, Cotality says.
“Undisclosed real estate was once again the fraud segment with the highest increase,” says Matt Seguin, senior principal, Cotality Fraud Solutions, in the report. “As the percentage of investors grows, more borrowers have multiple properties and mortgages. Oftentimes, those mortgages are being refinanced simultaneously, and they may be with different lenders. This could be why we’re seeing a continuing uptick in undisclosed real estate debt.”
Cotality also found increasing risk trends in several other areas including income, identity and occupancy.
Photo: Aryan Dhiman