CoreLogic reported that the National Mortgage Application Fraud Risk Index increased to 122 in the fourth quarter of 2016. The trend shows increasing risk for the year overall from an index value of 115 in the Fourth Quarter of 2015.
Risks levels increased overall with the most significant increase being in purchase loans with LTVs of 80 or less. This is actually surprising, generally the higher the LTV, the higher the risk.
Syracuse, New York had the largest index increase with a 204% quarter of quarter (Q3 2016 to Q4 2016) increase. The application activity in Syracuse showed a trend of atypical transactions consistent with occupancy issues and reverse occupancy and investment scheme red flags. South Florida still leads the list though, followed by New York-Newark-Jersey City. Las Vegas is also on the list at number 10.
Based upon the current economic conditions and the fact that home prices are reaching those of late 2006, I expect to see a continuing increase in fraud, especially in occupancy, valuation and misrepresentations. I also anticipate an uptick in investment fraud schemes, straw buyers and, of course, flipping.