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2019 Mortgage Fraud Report September 2019 2019 Mortgage Fraud Report

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2019 Mortgage Fraud Report September 2019 2019 Mortgage Fraud Report 2019 Mortgage Fraud Report September 2019 2019 Mortgage Fraud Report Table of Contents Fraud Report National Overview . 1 National Mortgage Fraud Index Risk Overview . 2 Factors Affecting Fraud Risk . 3 National Mortgage Fraud Types Indicators . 4 Mortgage Fraud Trends An Update on Out-Of-State Investors . 5 An Update on Employment Tenures Less Than One Year . 6 iBuyers and Fraud Risk . 7 Multi-Closing Fraud Risk . 9 Mortgage Fraud Risk Highlights By State . 10 By Geography . 12 National Mortgage Fraud Index Methodology . 14 ii Fraud Report National Overview New York, Florida, and New Jersey remain the top three states for mortgage The CoreLogic Mortgage application fraud risk, with New Jersey moving from second to third place . Fraud Report analyzes New York had an 8 percent increase year-over year and Mississippi had a 9 percent increase—the other top ten states had stable or decreasing risk . the collective level of loan application fraud risk The top five states with the largest risk increases include: Idaho, Alabama, Mississippi, New York, and Delaware . States with the largest risk decreases the mortgage industry is include: Kansas, Missouri, Massachusetts, Illinois, and New Mexico. experiencing each quarter. Jumbo loans for home purchases are the only segment showing a risk CoreLogic develops the increase . index based on residential mortgage loan applications Nationally, all fraud types showed decreased risk . Undisclosed Real Estate Debt fraud risk had the greatest decrease year-over-year, followed by processed by CoreLogic decreases in Property and Income fraud types . LoanSafe Fraud Manager™, a predictive scoring technology. The report MORTGAGE APPLICATION includes detailed data for FRAUD RISK INDEX 1 in 123 six fraud type indicators MORTGAGE APPLICATIONS that complement the ESTIMATED TO HAVE 11 4%. national index: identity, INDICATIONS OF FRAUD Q2 2018 TO Q2 2019 IN Q2 2019 income, occupancy, During the second quarter of The CoreLogic Mortgage property, transaction, and 2019, an estimated 0.81 percent Application Fraud Risk Index undisclosed real estate debt. of all mortgage applications decreased 11.4 percent nationally contained fraud, about 1 in 123 from the second quarter 2018 to applications. By comparison, in the second quarter of 2019. This is the second quarter of 2018, our the first decrease in the index since estimate was 0.92 percent, or the third quarter of 2016. The about 1 in 109 applications. decrease is attributed to a strong spike in lower-risk refinance originations, fueled by a decline in interest rates, similar to the conditions of the last decrease. September 2019 | 1 2 | National Mortgage Application Fraud Index by Loan Segments: Refinance MortgageNational Application Segments: Loan Index by Fraud Purchase MortgageNational Application Index Over Time Fraud by 17 percent -and in the jumbo refinance segment, which not only decreased in risk the conforming purchase and refinance segments - both down more than 25 small increase in risk of3 In nearly every segment, risk decreased year-over-year Risk Overview National Mortgage Fraud Index 00 00 100 140 10 200 200 250 250 10 150 120 100 100 150 150 110 90 50 50 0 0 2019 Mortgage Fraud Report 2010-Q 2010-Q 2010-Q . 4 percent but also increased in volume more than any other segment 2010-Q4 2010-Q4 2010-Q4 2011-Q1 2011-Q1 2011-Q1 2011-Q2 2011-Q2 2011-Q2 2011-Q 2011-Q 2011-Q 2011-Q4 2011-Q4 2011-Q4 2012-Q1 2012-Q1 2012-Q1 2012-Q2 2012-Q2 2012-Q2 2012-Q 2012-Q Conforming_Residence 2012-Q Conforming_Residence 2012-Q4 2012-Q4 2012-Q4 . 201-Q1 8 percent 201-Q1 201-Q1 201-Q2 201-Q2 201-Q2 201-Q 201-Q 201-Q 201-Q4 201-Q4 201-Q4 2014-Q1 2014-Q1 2014-Q1 . 2014-Q2 The most notable risk decreases were in 2014-Q2 2014-Q2 2014-Q 2014-Q 2014-Q 2014-Q4 2014-Q4 2014-Q4 2015-Q1 2015-Q1 2015-Q1 2015-Q2 2015-Q2 Jumbo 2015-Q2 Jumbo 2015-Q 2015-Q 2015-Q 2015-Q4 2015-Q4 2015-Q4 201-Q1 201-Q1 201-Q1 201-Q2 201-Q2 201-Q2 . 201-Q Jumbo purchases had a 201-Q LTV_GT_80 201-Q LTV_GT_80 201-Q4 201-Q4 201-Q4 2017-Q1 2017-Q1 2017-Q1 2017-Q2 2017-Q2 2017-Q2 2017-Q 2017-Q 2017-Q 2017-Q4 2017-Q4 2017-Q4 2018-Q1 2018-Q1 2018-Q1 2018-Q2 2018-Q2 2018-Q2 2018-Q 2018-Q 2018-Q 2018-Q4 2018-Q4 2018-Q4 2019-Q1 . 2019-Q1 2019-Q1 2019-Q2 2019-Q2 2019-Q2 refinance a jumbo loan. jumbo a refinance to worthwhile it make may decrease rate interest small a Even quarters. three prior the to compared percent 0.5 interest rates dropped about average the where 2019, Q2 in came change the of Most less than or equal to 100 percent. LTV greater than 80 percent, but applications for all mortgages with The LTV 80–100 conforming loan limit. loan amount greater than the than or equal to 80 percent and a occupied mortgages with LTV less contains applications for owner- The Jumbo LTV≤80 conforming loan limit. amount less than or equal to the equal to 80 percent and aloan Loan-To-Value (LTV) less than or owner-occupied mortgages with consists of applications for The Conforming LTV≤80 DEFINITIONS segment consists of segment segment segment segment Factors Affecting Fraud Risk After steadily increasing since late 2016, fraud risk slowed and stabilized “The decrease in fraud through Q1 2019 . Interest rates from mid-2018 through Q1 2019 were risk mid-2019 appears relatively stable, averaging around 4.5 percent (30-year fixed). During that time the fraud risk index showed very little movement – from 149 to 152. temporary, based on However, in Q2 2019, rates dropped to an average of around 4 0. percent . unexpected interest rate The mix of purchase and refinance transactions also changed - refinances drops and an influx of low- accounted for 28 percent of applications for the last half of 2018, but by Q2 2019, they increased to 35 .5 percent . risk refinance transactions. Loan volumes overall were also up, which is usually a positive sign for The absolute number of a reduction in fraud risk . With a strong pipeline of loans, commission- risky loans did not decrease dependent loan participants are less likely to stray from acceptable practices . but is part of a larger mortgage market for now.” Share of Single-Family Originations Bridget Berg, Mortgage Fraud Solutions Forecast 80% Principal at CoreLogic 68% 70% 0% 50% 40% 0% 28% 20% 10% 4% 0 2000 2002 2004 2006 2008 2010 2012 2014 201 2018 Home Purchase Home Refinancing Home Improvement Source: HMDA (2000-2017), CoreLogic public records (2018), average of MBA, Freddie Mac, Fannie Mae projections (2019). September 2019 | 3 National Mortgage Fraud Types Indicators Undisclosed real estate debt fraud occurs when a loan applicant intentionally UNDISCLOSED REAL ESTATE DEBT FRAUD RISK fails to disclose additional real estate debt or past foreclosures . During the second quarter of 2019, this type of fraud risk decreased 12 .8 percent compared to the same quarter in 2018 . While the risk indicator decreased 12 8%. year-over-year, this is one of the most common issues today . Q2 2018 to Q2 2019 PROPERTY FRAUD RISK Property fraud occurs when information about the property or its value is intentionally misrepresented . From the second quarter of 2018 to the second quarter of 2019, property fraud risk decreased 9 9. percent nationally . 9 9%. Q2 2018 to Q2 2019 INCOME FRAUD RISK Income fraud includes misrepresentation of the existence, continuance, source, or amount of income used to qualify . From the second quarter of 2018 to the second quarter of 2019, the income fraud risk indicator decreased 7 7. percent . 7 7%. Q2 2018 to Q2 2019 Transaction fraud occurs when the nature of the transaction is misrepresented, TRANSACTION FRAUD RISK such as undisclosed agreements between parties and falsified down payments. The risk includes third party risk, non-arm’s length transactions, and straw buyers . At the end of the second quarter of 2019, the transaction risk indicator 3 8%. decreased 3 .8 percent when compared to the same quarter in 2018 . Q2 2018 to Q2 2019 Identity fraud occurs when an applicant’s identity and/or credit history is IDENTITY FRAUD RISK altered, a synthetic identity is created, or a stolen identity is used to obtain a mortgage . This indicator decreased 2 9. percent from the second quarter of 2 .9% 2018 to the second quarter of 2019 . Q2 2018 to Q2 2019 Occupancy fraud occurs when mortgage applicants deliberately misrepresent OCCUPANCY FRAUD RISK their intended use of a property (primary residence, secondary residence or investment). Programs, pricing, and underwriting guidelines are impacted by a property’s intended occupancy . From the second quarter of 2018 to the 2 0%. second quarter of 2019, the occupancy fraud indicator decreased 2 0. percent . Q2 2018 to Q2 2019 4 | 2019 Mortgage Fraud Report Mortgage Fraud Trends An Update on Out-Of-State Investors In our 2018 annual report, we examined the increased risk and increased frequency of out-of-state investor (OOSI) applications. Key observations included: Markets with high concentrations of OOSI activity had higher 90-day delinquencies and foreclosures . Mortgage fraud rates for investment properties are 88 percent higher than baseline, and 140 percent higher for OOSI properties . Reviewing our Mortgage Fraud Consortium data for 2018, we found this activity continues to increase: OOSI activity increased from 20 percent of investment applications in 2017 to 22 percent of investment applications in 2018 . The total activity increased by 37 .5 percent from 2013 to 2018 .
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