Multi-Unit Property Loans Pose Higher Fraud Risk Than Other Property Types

February 27, 2014 / 3 min read

Fraud risk index is double that of single-family residences, condos, planned unit developments

Agoura Hills, CA., Feb. 27, 2014 — Interthinx, a leading provider of comprehensive risk mitigation solutions for the financial services industry, has released its quarterly interactive Mortgage Fraud Risk Report, covering data collected in the fourth quarter of 2013.

For the final quarter of 2013, the national Mortgage Fraud Risk Index value is 101, a 2 percent increase from a year ago but a 7 percent decrease from the previous quarter. This quarter’s findings show that loans associated with multi-unit properties have a much higher fraud risk than loans associated with other property types. The Mortgage Fraud Risk Index for multi-unit properties is 250, which is more than double the index for single-family residences, condos, or planned unit developments (PUDs).

Other notable findings in the report include the following:

The decline in the national mortgage fraud risk index value for the fourth quarter is driven by a
19 percent decrease in identity fraud risk and, to a lesser extent, a 5 percent decrease in occupancy fraud risk. The employment/income fraud risk index was the only index to increase this quarter (1 percent).
California is again the riskiest state, with a mortgage fraud risk index value of 139. It has eight metropolitan statistical areas (MSAs) on the top ten list for overall risk, nine of the top ten MSAs on the list for employment/income fraud risk, and six of the ten riskiest ZIP codes in the United States.
Tulsa, Oklahoma, is the riskiest MSA this quarter, with a mortgage fraud risk index value of 175, up 20 percent from last quarter. Tulsa ranks number one for identity fraud risk, number two for occupancy fraud risk, and number three for property valuation fraud risk.

“One of the lessons lenders should take from this quarter’s report is not to overlook the most obvious areas for fraud risk,” said David G. Kittle, CMB, Interthinx senior vice president of industry strategy. “For example, it’s not surprising that this quarter’s report showed high risk in multi-unit property loans, as they are most often used as investment vehicles and have a high propensity for occupancy and employment/income fraud. Knowing the market and where the risks lie go a long way in preventing fraudulent loans from reaching the post funding stage.”

“It’s important for lenders to take the long view when it comes to fraud risk and not become complacent when it seems as though the risk is declining,” said Jeff Moyer, president of Interthinx. “While the national fraud index was down from last quarter, our findings still showed that it was up compared with this time last year. As always, there is a greater risk for fraud in a tightening purchase market, and all evidence seems to point to this scenario for 2014. One must always be vigilant where fraud risk is concerned.”

The Mortgage Fraud Risk Report is an Interthinx information offering created by an internal team of fraud experts. This is the nineteenth time Interthinx has released its quarterly report. The report provides deeper insight into current fraud trends through the analysis of millions of loan applications amassed from the industry’s use of the Interthinx FraudGUARD® loan-level fraud detection tool.

For more information about Interthinx and its Mortgage Fraud Risk Report, visit http://www.Interthinx.com.

About Interthinx
Interthinx, a Verisk Analytics (Nasdaq:VRSK) subsidiary, provides essential solutions to mitigate risk in the mortgage and retail lending marketplace. Interthinx offers capabilities in mortgage fraud and verification, property valuation, compliance, quality control, loss mitigation, and capital planning that are used by the nation’s top financial institutions. Interthinx helps its clients minimize risk, increase operational efficiencies, satisfy regulator demands, manage data verification, and remain compliant. For more information, visit www.interthinx.com or call 1-800-333-4510.

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Kerri Milam
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kerri@depthpr.com