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Mortgage Fraud Risk Highest in Years

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The amount of mortgage fraud now being carried out across the country is on the rise, as criminals use a larger number of different methods to deceive industry professionals.

The risk of fraudulent home loan filings increased some 16 percent during the final three months of last year when compared with the period from July to September, according to the latest Mortgage Fraud Risk Report issued quarterly by the mitigation solutions firm Interthinx. The increase also brought the most recent levels 9 percent higher than those observed just a year before. Consequently, the overall index has been more or less on the rise since the start of 2012, and now stands at the highest point seen since Interthinx began issuing the report in the second quarter of 2009.

The reason for this sizable increase was largely that the risk of property valuation fraud rose by 25 percent on a quarterly basis, the report said. While instances of this type of issue rose nationwide, it was particularly problematic in some of Florida and California’s growing metropolitan areas, where investors are pouring into the markets in large quantities, making it easier to commit this type of fraud in particular thanks to quickly changing property values.

Florida specifically saw this problem continue, as it maintained its spot atop the nation’s states with the highest risk, just ahead of Nevada, the report said. It had three cities in the nation’s top 10 riskiest markets, and while California had a few on it as well, on a state-wide basis it slipped to eighth in the nation. Meanwhile, other states in the Eastern U.S. saw far more fraud risk even as it declined in the west. Illinois and Ohio, for example, climbed to fifth and sixth in the nation, respectively.

“Although most of the ‘usual suspects’ that typically dominate the Mortgage Fraud Risk Report remain, there is a decided ‘head east’ trend as states like Illinois and Ohio jump up the ranks of the riskiest and show a marked increase in property valuation fraud risk, especially in markets with high levels of investor activity,” said Mike Zwerner, senior vice president of Interthinx. “Being aware of these broad-based trends enables our industry to make more informed operating decisions and helps educate those with an interest in our industry.”

Consumers have been more interested in obtaining mortgages these days, with interest rates remaining at or near record lows and home prices rising once again, but still nowhere near pre-recession levels.

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