The overall risk of mortgage fraud decreased 8 percent in the third quarter of 2012, but valuation fraud remained a big risk, Mortgage Daily reported Nov. 26.
The Mortgage Fraud Risk Index published by data firm Interthinx was 137 in the third quarter, representing the lowest level of risk in two years. An index value of 100 signifies a nominal level of risk. However, the U.S. Property Valuation Fraud Risk Index was 203 in the third quarter — high but still down 11 percent from the second quarter and down 9 percent year-over-year.
While Florida and Nevada posed the biggest risk for mortgage fraud overall, communities in Florida and California proved riskiest for valuation fraud.
“Florida's risk had been on a downward trend but a spike in risk this quarter, coupled with declining risk nationally — particularly in Nevada and Arizona — was enough to bring Florida to the forefront,” the report stated, Mortgage Daily reported.
Six of the 10 metropolitan statistical areas cited for being the worst for mortgage fraud were located in California, with the city of Merced taking the top spot. Florida had some of the worst MSAs, as well, with Miami at No. 3. Combined, Florida and California accounted for more than half of all “very high” MSAs.
“The Miami MSA has, since the inception of this report, been the most frequently occurring MSA in the type-specific risk lists,” the study said, Mortgage Daily reported.
The report noted that investor properties were more than three times as risky for fraud as compared to owner-occupied properties.
According to the Interthinx report, the risk of occupancy fraud perpetuated by investors who falsely claimed an intention to occupy a property was down 4 percent since the second quarter and 10 percent since the third quarter 2011.
“Investment properties in Florida are significantly more risky overall than those purchased for owner occupation and especially in the employment/income fraud risk category, where investment properties present more than three times the risk for fraud than do primary residence purchases,” the report stated, Mortgage Daily reported.