Cotality: Mortgage Application Fraud Steady in Q1 2025

(Image courtesy of Pixabay/pexels.com)

Cotality, Irvine, Calif., released its National Mortgage Application Fraud Risk Index for Q1, finding that the index is at 133, down 0.3% from Q4 2024.

Year-over-year, it’s up 7.3% from Q1 2024, when it held a score of 124.

By category, the largest year-over-year increase in Q1 2025 is in the transaction risk category at 4.6%. Cotality defines transaction risk as that in applications where elements of a home purchase transaction were not fully represented to the lender, such as hidden sales concessions, non-arm’s length sales and rapid property flipping.

Cotality reported other indicators that predict elevated fraud activity. Those include moderate increases in trends related to income (high income relative to time on the job or for the area); transactions (alerts on purchase transactions with multiple-high risk elements trended up); occupancy (increased alerts that a primary or secondary home will not be occupied as originally disclosed); and property (higher levels of alerts for values in the higher ranges of geographic areas and properties being resold within one year of a prior transaction.)

The top metro areas with the highest fraud risk are Poughkeepsie-Newburgh-Middletown, N.Y., up by 37% from the end of Q4 to Q1; New Haven-Milford, Conn., up by 30% during that period; Miami-Fort Lauderdale-Pompano Beach, Fla., down 5% during that period; New Orleans-Metairie, La., flat; and Houston-The Woodlands-Sugar Land, Texas, up 7% during that period.

Rounding out the top 10 are Stockton, Calif., Albany-Schenectady-Troy, N.Y. (up 82%), New York-Newark-Jersey-City, N.J., Los  Angeles-Long Beach-Anaheim,, Calif., and Cape Coral-Fort Myers, Fla.

“While mortgage delinquencies are currently low across the U.S., the market is ripe for an increase in fraud because of the continuing high interest rates, slow housing market, and other increasing costs of homeownership like insurance affordability,” said Matt Seguin, Senior Principal, Fraud Solutions. “If market conditions continue to challenge sellers, risks like misrepresented down payments, inflated prices and straw buyers could increase dramatically.”