3Q Fraud Index Shows Increase in Multifamily Risk

November 14, 2022 |By msorhan-msorhan@mba.org

CoreLogic, Irvine, Calif., said its National Mortgage Fraud Risk Index showed little change in the third quarter, although it noted a “significant” increase in risk levels for multifamily purchases.

The overall index held steady at 122 in the third quarter; from a year ago, the Index fell by 2 percent from 125.

Risk levels for most segments were stable from the last quarter, with one exception: multi-family purchases (2- to 4-unit properties) showed a significant risk increase, with a higher percentage of multi-family transactions scoring in the highest range.

“The primary risk issue seen in these applications was occupancy concerns, where occupancy as a primary residence appeared unlikely given the superiority of their current residence,” the report said.

CoreLogic noted overall application volumes continued to decline in Q3. Purchases made up 75% of transactions, the highest level since inception of the index in 2010. Within the purchase segments, jumbo and investment purchase volumes decreased, but government (FHA and VA) purchase volumes increased.

The report said Miami-Fort Lauderdale-Pompano Beach, Fla., had the highest fraud risk rank in the third quarter of 100 metros surveyed, with an index of 313, up by 9 percent from the second quarter. Poughkeepsie-Newburgh-Middletown, N.Y. ranked second at 253, although the index fell by 2 percent from the second quarter. Stockton, Calif., ranked third at 223, up by 8 percent from the second quarter.

Rounding out the 10 highest fraud risk metros: New York-Newark (217, up 8 percent from the second quarter); Bridgeport, Conn. (206, up 18 percent); New Haven, Conn. (204, up 7 percent); New Orleans (202, up 5percent); Houston (191, up 8 percent); Los Angeles (188, up 2 percent); and Albany, N.Y. (178, up 8 percent).

The Index is calculated from aggregation of individual loan application fraud risk scores during the previous quarter. Score compilations are calculated for the 100 highest-populated Core Based Statistical Areas in the U.S.