More People Lying About Income on Mortgage Apps

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The risk of fraud on mortgage applications is decreasing, but more people are lying about their income, according to a new report from CoreLogic.

The agency found fraud risk among U.S. mortgage applications declined 5.6 percent year over year in the second quarter of 2013, with fraudulent residential mortgage loan applications totaled an estimated $5.3 billion nationally, down from $5.5 billion in the second quarter of 2012. But the value was up slightly from $5.2 billion in the first quarter of 2013.

The analysis indicates that during the second quarter of 2013 approximately 19,700, or 0.8 percent, of mortgage applications were identified as having a high risk of fraud, down from 20,900, or 0.7 percent, in the second quarter of 2012.

CoreLogic's Fraud Risk Index tracks six different indexes: income, occupancy, employment, identity, property and undisclosed debt.

Of the six indexes, "intentional misrepresentation of income" on a mortgage application showed the greatest year-over-year increase in the second quarter of 2013, rising 13.3 percent. Income application fraud risk increased 7.5 percent from the first quarter, CoreLogic said.

Deliberate over- or under-valuing of a home showed the greatest decrease at 20.8 percent in the second quarter of 2013 compared to a year ago.

"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," said CoreLogic chief economist Mark Fleming.

More from the report:

• The total dollars of fraudulent mortgage loan applications increased in 27 states compared to a quarter ago.

• Ohio had the highest year-over-year growth in mortgage application fraud risk at 30.1 percent, followed by Hawaii (19.6 percent), Kentucky (16.6 percent), Connecticut (15.0 percent) and Alaska (13.8 percent). See Table 1 and accompanying chart.

• The five states with the highest estimated value of fraudulent mortgage applications were California ($864 million), New York ($278 million), Florida ($273 million), Texas ($261 million) and Virginia ($231 million).

• Of the 75 CBSAs analyzed, Allentown-Bethlehem-Easton, Pa. had the highest year-over-year increase in mortgage application fraud risk at 33.6 percent, followed by Honolulu, Hawaii (27.4 percent), Greenville-Mauldin-Easley, S.C. (26.8 percent), Rochester, N.Y. (22.9 percent) and Bridgeport-Stamford-Norwalk, Conn. (22.5 percent). See Table 2.

• The five CBSAs with the highest estimated value of fraudulent mortgage applications were New York, N.Y. ($339 million), Los Angeles, Calif. ($337 million), Washington, D.C. ($226 million), Chicago, Ill. ($159 million) and San Francisco, Calif. ($156 million).