Data released by Mortgage Asset Research Institute (MARI), a division of LexisNexis®, reveals that mortgage fraud in the United States rose 7% between 2008 and 2009. However, overall, the report indicates a downward trend from 67 percent in 2005 to 59 percent in 2009.
In 2009, Florida was number one on the list of top ten states for mortgage fraud and misrepresentation, followed by New York (second), California (third) and Arizona (fourth).
Arizona, New Jersey and Maryland also made the top ten states for mortgage fraud. New Jersey and Virginia appeared in the top ten for the first time in 2009. In 2008, Delaware made a brief appearance as number one in the nation for mortgage fraud and misrepresentation, while 2006 and 2007 Florida topped the list.
According to MARI, "While the pace has slowed since the 2007-2008 increase of 26%, the continued increase is believed to be attributed to better industry reporting and policing." The 12th Periodic Mortgage Fraud Case Report analyzes the current state of residential mortgage fraud and misrepresentation committed by professionals. It is based on data submitted by subscribers of LexisNexis® Mortgage Asset Research Institute.
"The data suggests that in 2009 there was a 7% increase in the number of incidents of fraud reported to the LexisNexis Mortgage Asset Research Institute on top of the 26% increase reported in 2008. While this is a noticeable increase, we believe that mortgage fraud is significantly understated, even during times of massive origination volumes," said Jennifer Butts, LexisNexis Mortgage Asset Research Institute manager of Data Processing and co-author of the report.
Interestingly, the report found that eight of the top ten states for all mortgage fraud are located in the eastern U.S., while the highest concentration of appraisal fraud was found in Ohio, Illinois, and Michigan.
For the past six years, application misrepresentation has led among the various types of mortgage fraud. In 2009, application misrepresentation was calculated as 59 percent of the total mortgage fraud reported. Next in line were appraisal and valuation misrepresentations.
Since mortgage fraud played a large role in creating the national housing crisis, its continued rise may represent a significant problem for recovery. While it leads in reported mortgage fraud, Florida is also the number one state for depreciating home prices.
It is noteworthy, however, that mortgage fraud actually declined in Florida between 2008 and 2009, even though the index ranks the state as the leader in the nation. The mortgage fraud index (MFI) reading for Florida in 2009 was reckoned at 292, which is a significant improvement from 2008, when it was estimated at 430.
New York's MFI for 2009 was 218 – which was a 14% increase over its score in 2008. Based on MARI's calculations, an MFI score of 100 means that a state has exactly the amount of mortgage fraud which it was expected to have. A score of 0 means a state has no mortgage fraud at all (there were none of those). A score that is more than 100 indicates a greater than expected level of fraud.
Full MARI report