Higher mortgage interest rates are doing more than sidelining potential homebuyers. It’s increasing the potential for mortgage fraud. The CoreLogic National Mortgage Application Fraud Risk Index was flat in Q1 2022, moving to 137 from 138 from the previous quarter.. But on a year-over-year basis, the index increased by 15%.
CoreLogic calculates its Mortgage Fraud Index from the aggregation of individual loan application fraud risk scores. These numbers are then calculated for the United States’ 100 highest-populated Core Based Statistical Areas.
CoreLogic pointed out that several different frauds can impact a mortgage, such as occupancy fraud, employment and income fraud and property fraud. The reason why mortgage fraud is inching upward is because of lower revenues and higher challenges in the lending environment. Noted CoreLogic: “Many (lenders) are having to make cutbacks; at the same time, loans are more challenging to originate than in the last two years.”
CoreLogic data said that 46% of loan applications during Q1 2022 consisted of refinances, a 53% decrease from the previous quarter. It’s estimated that both rate-reduction refinance share and volume will decrease moving forward, with more refinances encompassing cash out.
This could help drive higher fraud risk moving forward, especially as commission-based loan participants and borrowers are both anxious to get loans approved and closed before locks expire or rates increase further. The result could be an increase in riskier behaviors, according to CoreLogic.
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