Mortgage Fraud Up Despite Flagging Application Volume

December 2, 2008 No Comments »

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Mortgage fraud increased 45 percent from a year ago despite a big drop in loan application volume, the Mortgage Asset Research Institute reported today.

Once again, Florida led the nation in mortgage fraud during the second quarter, followed by California and Illinois.

Fraud was most rampant in the metropolitan areas of Miami and Tampa, Los Angeles and San Francisco, and Chicago and Rockford.

Florida saw a five percent increase in “General Application Misrepresentation,” defined as the potential misrepresentation of name, occupancy or asset information during the application process, while California saw a 20 percent decrease in such offenses.

However, California saw an increase in asset and debt misrepresentation (stated income loans), such as bank statement fraud, falsified tax returns, and shoddy Verification of Deposit (VOD) forms.

Meanwhile, Illinois reported the highest number of income and employment misrepresentation on loan applications.

Nearly two-thirds (65 percent) of incident submissions were attributed to General Application Representation, followed by income and asset misrepresentation.

Additionally, appraisal misrepresentation increased six percent from the first quarter, and could be attributed to 21 percent of all incidents.

Occupancy, credit history, and employment misrepresentation all decreased between the first and second quarter of 2008.

It’s clear from this report that loose lending still persists as borrowers, and those they work with, continue to circumvent more stringent underwriting guidelines instituted by banks and mortgage lenders.

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