U.S. Real Estate Markets See Mortgage Fraud Soar, and Fast Rising Prices Are A Red Flag

U.S. home prices are rising very quickly, and so is fraud to obtain mortgages to buy homes. The CoreLogic National Mortgage Application Fraud Risk Index made a big jump Q1 2021. The rapid increase of the index means more red flags are being found in the application process. Hot markets with a sudden surge in sales, also happened to top the list for the highest risk of fraud growth.

CoreLogic Mortgage Fraud Index 

Signs of mortgage fraud risk are surging according to the mega property-tech firm. The Index reached 122.9 in Q1 2021, up 11.9% from the previous quarter. Compared to the same quarter a year before, this number was 7.7% higher. It’s a very sharp increase for such a short period of time.

Las Vegas and Miami Real Estate Top The Fraud Risk Index

Statistical regions with the highest fraud risk were Las Vegas, Poughkeepsie, and Miami. Las Vegas had the highest score with an index reading of 220 for Q1 2021, up 25% from the previous quarter. Poughkeepsie, yeah — that Poughkeepsie, hit 219, up 1% over the same period of time. Miami experienced a more modest gain with a reading of 211, up 10% from the previous quarter. All three regions have more than twice the baseline score of 100. The baseline is set to the national score in 2010.

U.S. Metros With The Highest Mortgage Fraud Risk

The top 15 core based statistical areas (CBSA) by CoreLogic Mortgage Application Fraud Risk Index score.
Source: CoreLogic; Better Dwelling.

San Jose and Austin Real Estate See Highest Fraud Risk Growth

The growth of mortgage fraud risk surged in markets that have seen a big boom in sales recently. The highest growth is in San Jose where the index reached 154 in Q1 2021, up 49% from the previous quarter. It was followed by Austin’s score of 156, which saw 37% growth over the same period. Las Vegas also makes an appearance for growth, with an index of 220, up 25% from the previous quarter.  

Mortgage fraud tends to rise when consumers see more risk in not owning than being caught. CoreLogic said rapid home price increases were one red flag. Income reasonability and flipping fraud were also other issues setting off alerts. A lack of affordability is one of the biggest contributors to the rapid increase of fraud risk. The elevated risk levels are forecast to persist for at least the rest of the year.

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  • Tom Wolfe 3 years ago

    Know Your Customer – it’s the law. Banks are utterly complicit.

    • A Literate Canadian 3 years ago

      KYC is international law. Canadian banks could care less and feel no need to comply, it only interferes with business.

  • Oldguy 3 years ago

    I live in Florida and the market is starting to look like Canada. But it makes me wonder, if fraud is so readily tracked in the US, why do we not ever read about it in Canada, where it must be much worse? Curious, eh?

    • jack 3 years ago

      lots of fraud in canada. Infact, normal people can’t afford to buy. It’s all fraud driven.

      • A Literate Canadian 3 years ago

        Fraud, government endorsed and protected, is the actual normal. Banks couldn’t survive without it.

  • Joel Lindsay 3 years ago

    Yes, interesting question. We know that the average and median income do not even come close to supporting the prices in many markets in Canada, especially considering the stress tests.

    It is pretty apparent that mortgage brokers are using every trick in the book to inflate incomes, and banks are turning a blind eye because most of their risk is backed up by the taxpayer.

    Sad that the buyers that committed this fraud will be bailed out, the mortgage brokers who facilitated this will keep their commissions, the banks that ignored it will be bailed out, the realtors that counselled their clients to pay as much as possible will keep their commissions and the politicians who were too stupid to recognize or too weak to do anything about it will not be held accountable.

    And we run around talking about how strong our banking system is. Nope!

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