Interthinx: Property Valuation Fraud Becoming A Growing Trend

Cases of property valuation fraud appear to be on the rise, according to Interthinx's Mortgage Fraud Risk Report for the third quarter. The report's Mortgage Fraud Risk Index grew more than 11% from the second quarter to 145, with the Property Valuation Fraud Index jumping 25% quarter over quarter and 46% year over year.

The uptick in valuation fraud shows the continued shift to involving short sales, real estate owned inventories and refinancing by borrowers whose equity has been impaired by falling real estate values, Interthinx says.

The company also notes that, despite relatively small variations on the national scale, the fraud index range from the lowest- to the highest-risk state has widened considerably, from 100 to 215. Thus, Interthinx concludes, the riskiest states are now much more risky than a year ago, and the least risky states are much less risky than a year ago.

Unsurprisingly, the states with the highest overall levels of mortgage fraud risk correspond closely with the states with the highest levels of foreclosure activity, consistent with the observed increase in foreclosure-related fraud schemes.

Interthinx analysts expect the fraud indices will continue to rise over the next three years as a large number of adjustable-rate mortgage loans (ARMs)Â – especially option-ARMs – reset between now and the first quarter of 2012.

SOURCE: Interthinx


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