Appraisal Fraud – Stay Vigilant

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Appraisal fraud

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.

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2 Responses

  1. Jeremy Hall Appraisals - Colorado Jeremy Hall Appraisals - Colorado says:

    Appraisers report lending issues daily, all over the net. Many of these involve failure to provide adequate data protection, adequate review, adequate engagement, and so on, and so forth. Nothing is ever done about it. But if you complain on an appraiser, that’s when heads start rolling. Not buying it.

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  2. Mike Ford Mike Ford says:

    Did I miss something?

    The article attributed something to the ‘Nations largest professional association of appraisers’ but then failed to identify which association that is.

    I certainly hope they don’t mean CoreLogic itself. It may be many things, but a professional appraisers association wouldn’t be considered by most appraisers, to be one of them.

    Generally speaking, appraisers do NOT report suspected loan fraud in my experience. We report conditions found at the property or within other supplied data. Suspected loan fraud would be a subjective consideration and an unsupported conclusion. Barring some exceptional circumstance, I cannot see where I would ever have meaningful data to indicate a loan fraud, that the lender does not already have.

    Do we ‘know’ of loan fraud? Only anecdotally..

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Appraisal Fraud – Stay Vigilant

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