According to the FBI’s Mortgage Fraud Report, up to 70 percent of early mortgage payment defaults may be linked to borrower misrepresentation on loan applications.
Not surprisingly, seven of the top 10 states with the highest concentration of mortgage fraud also happened to fall in the top 10 list for foreclosures.
These states included California, Florida, Georgia, Indiana, Michigan, Ohio and Texas.
“When we talk about the increasing numbers of defaults and foreclosures, we need to really look at the root of the problem, and the FBI’s report has nailed it,” states Jay Meadows, CEO of Rapid Reporting, a national provider of pre-funding income and identity verification products for the mortgage industry.
“While it would be naive to assume that we could narrow the cause of every foreclosure down to one single factor, this FBI information clearly indicates that borrower fraud plays a significant role in the record number of defaults and foreclosures we’ve been seeing over the past couple of years,” he added.
Mortgage fraud costs mortgage lenders an estimated $4 billion per year, and 64% of all mortgage fraud is income or identity related, according to Rapid Reporting.