2014 Annual
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Executive Summary
This report highlights some of the most significant mortgage fraud risk trends based on analysis of loan applications processed in 2014 by the Interthinx FraudGUARD® system.
  • Evolution in the residential lending market continued at a feverish pace in 2014 with heightened focus on compliance risks and the adoption of new business practices fostered through regulatory mandates, such as Dodd-Frank. With this evolution came concerns that transactional risk from poor data integrity, fraud risk and loan performance would not be well served in this new environment. It is perhaps too early to say that fraud risk is in remission, but this report highlights a positive trend toward a nominal overall risk. However, we still see risk and performance indicators which tell a more cautionary tale around specific geographic risks, home equity risks and the re-emergence of alternate financing where history reminds us to remain vigilant. This report highlights the most significant risk trends based on analysis of loan applications processed in 2014 by the Interthinx FraudGUARD® system.
  • The 2014 Annual Mortgage Fraud Risk Index is 100 (n = 100), a 4 percent decrease from 2013. Each index is calibrated so that 100 is equal to a nominal baseline of fraud risk based on historical reviews. This shows a halt in the gradually rising trend in fraud risk observed over the past four years. We believe this is reflective of less overall real estate market volatility, stabilization of real estate prices and inventory across the nation.
  • Florida jumps from fifth position to first in 2014 with an index of 122, a gain of 6 percent. California retains number two position with an index of 120, even with a drop of 15 percent from 2013. New Jersey and Nevada remained in the top 10 in 2014. Georgia, historically a hot-bed of risk, rises back into the top 10 list for 2014 along with Rhode Island, New Hampshire, New York and North Carolina.
  • Geographic distribution of fraud risk continued to become more dispersed in 2014, moving from entire states toward regional, metropolitan statistical area (MSA), and ZIP code level concentrations. Although California did see a large drop in its index, it remains an area of concern.
  • The main drivers of risk among the top 10 riskiest states are property valuation and occupancy fraud risk. The states which exhibit higher levels of investor activity such as California, Florida, Nevada, Georgia, New Jersey and Arizona all feature a combination of property valuation and occupancy fraud risk. While Rhode Island, New Hampshire, New York and North Carolina all exhibit property valuation fraud as the primary driver of risk.
  • The top 10 riskiest states all exhibit a weak housing market with the exception of California. Four of the top 10 riskiest states, Florida, Georgia, Nevada and California are noted as improving while the remaining six states are either flat or declining.
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