─Market manipulation, above-average appraisals contribute to increased risk─
July 2, 2014, Agoura Hills, Calif.,
Interthinx, a subsidiary of First American Financial Corporation (NYSE: FAF) and a leading provider of comprehensive risk mitigation solutions for the financial services industry, has released its quarterly interactive Mortgage Fraud Risk Report covering data collected in the first quarter of 2014.
In the first quarter of 2014, the national Mortgage Fraud Risk Index value is 100, the same value as it was a year ago and down 1 percent from Q4 2013. The national Property Valuation Fraud Risk Index is 128, up 27 percent from last quarter and 17 percent from a year ago. Indicators suggest this increase is driven by persons in certain areas purchasing and listing multiple properties in the same neighborhood. By controlling those markets, these persons have the ability to artificially control the price of a property to their advantage. Another contributing factor observed is the rise of properties being appraised well above traditional valuation thresholds.
Other notable findings in the report include the following:
California continues to be the riskiest state with a Mortgage Fraud Risk Index of 146, and it contains eight of the 10 riskiest Metropolitan Statistical Areas, (MSAs) and eight of the 10 riskiest ZIP codes. California also continues to dominate the type-specific lists with four of the 10 riskiest MSAs for property valuation fraud, seven of the 10 riskiest MSAs for identity fraud, six of the 10 riskiest MSAs for occupancy fraud and eight of the 10 riskiest MSAs for employment/income fraud.
The top 10 riskiest states for Q1 2014 are California; Washington, D.C.; Florida; Maryland; Arizona; Connecticut; New Jersey; Maine; Arkansas; and Colorado. For the first time since the inception of this report in 2009, Nevada is not in the top 10.
After largely disappearing from the riskiest MSAs, Miami-Ft. Lauderdale-Pompano Beach, Florida reappeared this quarter as the ninth riskiest MSA in overall fraud risk with an index of 136, sixth riskiest for property valuation fraud and fourth riskiest for occupancy fraud.
“This quarter’s report is a reminder that lenders need to be aware of emerging fraud risks. The rise in property valuation risk is troublesome because collateral values are a critical element in making sound lending decisions,” said Jeff Moyer, president of Interthinx. “To make lending decisions with increased confidence in the loan's quality, we recommend that lenders use automated tools early in the valuation process to double check opinions of value, quality of work and regulatory compliance on issues such as licensing.”
The Mortgage Fraud Risk Report is an Interthinx information offering created by an internal team of fraud experts. This is the twentieth time Interthinx has released its quarterly report. The report provides deeper insight into current fraud trends through the analysis of millions of loan applications amassed from the industry’s use of the Interthinx FraudGUARD® loan-level fraud detection tool.
Interthinx, a subsidiary of First American Financial Corporation (NYSE: FAF), provides essential solutions to mitigate risk in the mortgage lending marketplace. Interthinx offers capabilities in mortgage fraud and verification, property valuation, compliance, quality control and loss mitigation that are used by the nation's top financial institutions. Interthinx helps its clients minimize risk, increase operational efficiencies, satisfy regulator demands, manage data verification and remain compliant. For more information, visit www.interthinx.com or call 1-800-333-4510.
About First American
First American Financial Corporation (NYSE: FAF) is a leading provider of title insurance, settlement services and risk solutions for real estate transactions that traces its heritage back to 1889. First American also provides title plant management services; title and other real property records and images; valuation products and services; home warranty products; property and casualty insurance; and banking, trust, and investment advisory services. With revenues of $5 billion in 2013, the company offers its products and services directly and through its agents throughout the United States and abroad. More information about the company can be found at www.firstam.com.