CoreLogic has released its latest Mortgage Fraud Report, showing a 37.2% year-over-year increase in fraud risk at the end of the second quarter of 2021, as measured by the CoreLogic Mortgage Application Fraud Risk Index.
The significant increase for mid-2021 follows a large drop seen in 2020 – a decrease driven mainly by the surge in traditionally low-risk refinances during the pandemic.
The current risk level is similar to mid-2019.
During the second quarter of 2021, an estimated 0.83% of all mortgage applications contained fraud: about 1 in 120 applications. By comparison, in the second quarter of 2020, the estimate was 0.61%, or about 1 in 164 applications.
Continued low mortgage rates and a record volume of refinances pushed overall fraud risk down. However, risk in the purchase segment increased 6%, with investment properties driving the highest risk in both purchase and refinance populations.
“Refinance opportunities that surged lending volumes during the pandemic may be winding down. The outlook is for fewer low-risk refinances compared to purchases and cash-out refinances, which translates to a higher-risk environment for fraud,” says Ann Regan, executive, product management at CoreLogic.
Nationally, most fraud types showed increased risk. Transaction risk showed an increase of 34.2% year-over-year. Income and property fraud risk decreased slightly, aligning with the strong job market and home price growth.
The top five states for risk increases include South Dakota, Washington, Alaska, Vermont and West Virginia. Less-populous states are more volatile due to lower levels of lending activity. These states all had below-average index values in 2020.
Nevada moved into the top position for mortgage application fraud risk, with New York, Hawaii, Florida, and California rounding out the top five.
The CoreLogic Mortgage Fraud Report analyzes the collective level of loan application fraud risk experienced in the mortgage industry each quarter. CoreLogic develops the index based on residential mortgage loan applications processed by CoreLogic LoanSafe Fraud Manager, a predictive scoring technology. The report includes detailed data for six fraud type indicators that complement the national index: identity, income, occupancy, property, transaction and undisclosed real estate debt.