Reported incidents of subscriber-verified mortgage fraud and misrepresentation by industry professionals have decreased from 2009 to 2010, according to a recent report by the LexisNexis Mortgage Asset Research Institute. Actual incidents, however, as opposed to reported, are believed to be up.
From year-to-year, there were 41% fewer reported fraud incidents throughout the nation. LexisNexis said this was the first time in several years that there was a decrease.
With the decline, the number of cases reported in 2010 is approximately at the same level that was seen in 2006.
“While this is a noticeable decrease, we believe it can be attributed to a variety of factors, including the post-economic crisis mortgage fraud landscape,” said Jennifer Butts, LexisNexis Mortgage Asset Research Institute manager of data processing and co-author of this report.
LexisNexis cites many reasons for less fraud being reported, including a decrease in origination volume, fewer resources available to investigate and report incidents and stronger financial crimes enforcement network requirements that encourage professionals to report on suspected fraud.
For the second consecutive year, Florida led the country for reported mortgage fraud and misrepresentation with an index of 302, which is 59 points lower than last year’s score. This means that the state has over three times the expected amount of reported mortgage fraud and misrepresentation for its origination volume.
New York was second in the report, one spot higher than last year, with an index score of 279. After falling to tenth place for 2009 originations, California is ranked third this year with a score of 233.
However, LexisNexis said the decrease in reported fraud misrepresentation does not correlate to actual fraud events that have taken place. According to LexisNexis’s mortgage fraud suspicious activity reports submissions, fraud occurrences are rising nationwide.
There were 70,472 incidents in 2010, a 5% increase from the previous year. In 2010 alone, the FBI filed 1,531 indictments and received 970 convictions. Through the end of February 2011, the agency reported 3,020 pending investigations, 72% of which involve losses of more than $1 million.
“Mortgage fraud has become more complex and harder to verify using traditional methods,” said Denise James, director of real estate solutions at LexisNexis Risk Solutions and co-author of this report.
“Mortgage businesses are quickly trying to implement new procedures to detect emerging frauds while, at the same time, focusing their energies on recovering the huge financial losses of recent years.”