CoreLogic Reports 11.4% Decrease in 2Q Mortgage Fraud Risk

CoreLogic, Irvine, Calif., released its quarterly Mortgage Fraud Report, showing an 11.4% year-over-year decrease in fraud risk at the end of the second quarter.

The analysis found an estimated one in 123 mortgage applications, or 0.81% of all applications, contained indications of fraud in the second quarter, compared to one in 109, or 0.91% a year ago.

“The decrease in fraud risk mid-2019 appears temporary, based on unexpected interest rate drops and the resulting influx of low-risk refinance transactions,” said Bridget Berg, principal of Fraud Solutions Strategy for CoreLogic. “The absolute number of risky loans has not decreased but are simply part of a larger mortgage market at this time.”

Other report findings:

–New York, New Jersey and Florida remain the top three states for mortgage application fraud risk. For the first time since 2017, New Jersey outpaced Florida and moved into the second position.

–Eight of the 10 riskiest states showed stable or decreasing risk over the past year.

–States with the greatest year-over-year risk growth include Idaho, Alabama, Mississippi, New York and Delaware. States with the largest decreases include Kansas, Missouri, Massachusetts, Illinois and New Mexico.

–Jumbo loans for home purchases is the only segment showing a risk increase.

–Nationally, all fraud types showed decreased risk. Undisclosed Real Estate Debt fraud risk saw the greatest decrease year over year, followed by decreases in Property and Income fraud types.

–iBuyers, or companies that use technology to instantly make an offer on a home, have helped lower fraud risk by accounting for more than 1% of all home sales in 2018.

Last week, First American Financial Corp., Santa Ana, Calif., said its Loan Application Defect Index decreased by 5.0 percent in July from June. From a year ago, the Defect Index was unchanged. The Defect Index is now 25.5 percent below its high point of risk in October 2013.

In its monthly Loan Performance Insights Report, CoreLogic said nationally 4% of mortgages were in some stage of delinquency (30 days or more past due, including those in foreclosure) in June, an 0.3 percentage point decline in the overall delinquency rate from a year ago.

CoreLogic said as of June, the foreclosure inventory rate fell to 0.4%, down 0.1 percentage points a year ago and matching the prior seven months as the lowest for any month since at least January 1999.

The report said the rate for early-stage delinquencies (30-59 days past due) rose to 2.1% in June, up from 2% a year ago. The share of mortgages 60-89 days past due in June was unchanged at 0.6%. The serious delinquency rate (90 days or more past due, including loans in foreclosure) fell to 1.3%, down from 1.7% a year ago to the lowest for the month of June since 2005. The share of mortgages that transitioned from current to 30 days past due rose to 1.1% in June, up from 0.9% a year ago. By comparison, in January 2007, just before the start of the financial crisis, the current-to-30-day transition rate was 1.2% and peaked at 2% in November 2008.

“A strong economy and eight-plus years of home price growth have made mortgage foreclosure an infrequent event,” said CoreLogic Chief Economist Frank Nothaft. “This backdrop will help the mortgage market limit delinquencies in most of the country whenever a downturn should start.”

CoreLogic said the nation’s overall delinquency remains near the lowest level since at least 1999. However, several states and metropolitan areas posted small annual increases in June. The highest gains were in Vermont (0.7%), New Hampshire (0.3%), Nebraska (+.2%) and Minnesota (0.2%), while the other four states–Michigan, Iowa, Wisconsin and Connecticut–saw a nominal gain of just 0.1%.

Some metropolitan areas also recorded small increases in overall delinquency rates. Metros with the largest increases were Janesville-Beloit, Wis. (2.5 percentage points) and Pine Bluff, Ark. (1.6 percentage points). Panama City, Fla.; Altoona, Pa.; and Kokomo, Ind. Saw increases of 0.6 percentage points.