Appraisal Fraud – Stay Vigilant
Remaining Vigilant Against Appraisal Fraud
While recent studies show that appraisal fraud is on the decline, the nation’s largest professional association of real estate appraisers still cautions lenders and other real estate industry professionals to be on the lookout for suspicious activity.
According to CoreLogic’s Second Quarter Mortgage Fraud Report, the risk of mortgage fraud decreased during the second quarter with valuation fraud showing the biggest improvement, falling 7.1 percent between the first and second quarters of the year.
However, fraud has escalated in cases where potential borrowers attempt to deceive lenders about their incomes. The report showed that an estimated $5.3 billion in residential loan applications with fraudulent information was submitted to U.S. home lenders in the first half of this year.
“Since the beginning of 2012, mortgage application fraud risk has totaled more than $30 billion nationally,” Dr. Mark Fleming, chief economist at CoreLogic, said in the report. “While the propensity toward application fraud risk has declined based on our index, as the housing market recovers, the volume of mortgage applications is rising and increasing the total amount of fraudulent mortgage loan application dollars.”
The CoreLogic report estimates that application fraud risk dropped by 5.6 percent year-over year during the second quarter. Approximately 0.8 percent, or 19,700 mortgage applications, was identified as having a high risk of fraud in the second quarter.
The LexisNexis 15th Annual Mortgage Fraud Report further showed that appraisal and mortgage fraud is improving nationwide.
The FBI’s pending fraud cases totaled 1,954 during fiscal year 2012 — down from 2,691 cases reported the previous year.
For mortgage originations reported during 2012, only 9 percent involved appraisal fraud plummeting from a high of more than 75 percent in 2009, according to the LexisNexis report.
Of course, fraud often involves multiple individuals and no one segment of industry professionals alone can combat such activity. Appraisers, home builders, real estate agents, title agents, loan originators and others involved in the mortgage and home buying process all need to make a concerted effort to identify fraud, to refrain from participating in such activity and to report any wrongdoing to the proper authorities.