The number of short sales has more than tripled since 2008, but mortgage lenders are losing $310 million in “unnecessary losses” annually as a result, according to CoreLogic’s “The Cost of Short Sales” 2010 research study.
And over half (55.8%) occur in just four hard-hit states, including Arizona, California, Florida, and Texas.
While short sales are an important component to the overall housing recovery, they also tend to be riddled with fraud.
CoreLogic believes one in 53 short sale transactions includes an “unnecessary loss,” with the average loss $41,500.
“By definition, short sales constitute a financial loss to lenders but will continue to be a necessary part of the mortgage industry as it seeks stabilization. The primary objective for lenders is to eliminate unnecessary loss,” said Tim Grace, senior vice president of Fraud Analytics, CoreLogic, in a release.
“The best way to mitigate fraud risk and unnecessary loss is through a collaborative effort where lenders collectively share pre-closing and post-closing information. Lenders in the CoreLogic Mortgage Fraud Consortium will benefit greatly from sharing knowledge of concurrent transactions pending on short sale properties in real time.”
Short sale fraud often involves two sale transactions within a short window of time, with the subsequent sale amount vastly higher than the first.