Bituminous Insurance Companies

Report Finds Mortgage Fraud at All-Time High

Release Date: March 24, 2009

Reported incidents of mortgage fraud in the U.S. are at an all-time high and increased by 26 percent from 2007 to 2008 according to a new report released by the Mortgage Asset Research Institute (MARI®), a LexisNexis® service. The Eleventh Periodic Mortgage Fraud Case Report To: Mortgage Bankers Association examines the current state of residential mortgage fraud and misrepresentation in the U.S. based on data submitted by MARI subscribers.

"MARI data shows that mortgage fraud is more prevalent today than it was at the height of the boom in mortgage loan originations," said John Courson, president and chief executive officer of the Mortgage Bankers Association.

The report found that, for the first time, Rhode Island ranked first in the country for mortgage fraud with more than three times the expected amount of reported mortgage fraud for its origination volume. Florida, ranked first in 2007 and 2006, dropped to second place and is followed by Illinois, Georgia, Maryland, New York, Michigan, California, Missouri, and Colorado.

"With fewer loan originations today, the data suggests that the economic downturn may have created more desperation, causing more people than ever before to try to commit mortgage fraud," said Denise James, LexisNexis Risk & Information Analytics Group director of Residential Mortgage Solutions. "Not only are we seeing traditional fraud trends, such as application fraud, but we are also seeing new types of emerging fraud occur," said James. "It is therefore imperative that the mortgage industry continue to share information and insights, and collaborate in the fight against mortgage fraud."

The report also found that:

The top fraud incident type in 2008 - representing 61 percent of all reported frauds - was application fraud, the fifth year in a row it topped the list. Second were frauds related to tax returns and financial statements, which jumped from 17 percent of reported frauds in 2007 to 28 percent of reported frauds in 2008.
Additional documented fraud types included, in order of volume, frauds related to appraisals or valuations, verifications of deposit, verifications of employment, escrow or closing costs, and credit reports.
The volume of reported frauds related to credit reports dropped from 9 percent to 4 percent between 2007 and 2008.

MARI has been servicing the mortgage and banking industries with essential risk management solutions since 1990. MARI provides valuable industry insight derived from its Mortgage Industry Data Exchange (MIDEX®) database, which contains an aggregation of reported incidents of fraud and verified misrepresentations submitted by leading mortgage industry participants. MARI analyzes this industry data and presents reports that depict a national composition of residential mortgage fraud and misrepresentation to support the industry's effort in the fight against mortgage fraud. The full text of the report is available at http://www.marisolutions.com/pdfs/mba/mortgage-fraud-report-11th.pdf. Interthinx, a unit of the Insurance Services Office, Inc. (ISO), provides automated fraud-protection, compliance, and decision-support tools for the mortgage industry. Interthinx systems interpret and validate data from loan applications and third-party sources to help make safe, efficient decisions on load. Information on Interthinx is available at http://www.iso.com/Landing-Pages/Landing-Pages/Interthinx-Fraud-Protection-for-the-Mortgage-Industry.html.

The information contained in this publication was obtained from sources believed to be reliable. ISO Services Properties, Inc., its companies and employees make no guarantee of results and assume no liability in connection with either the information herein contained or the safety suggestions herein made. Moreover, it cannot be assumed that every acceptable safety procedure is contained herein or that abnormal or unusual circumstances may not warrant or require further or additional procedure.