California, Florida No Longer Leading States with Mortgage Fraud

RESTON, Va. – California and Florida no longer have the dubious distinction of being the states with the highest incidence of mortgage fraud. According to a recently released study by the Mortgage Assets Research Institute, Nevada, Georgia, South Carolina, Utah, and Michigan are now in the top ranking spots. The MARI study reported that these five states’ subprime mortgage fraud rates are two to three times the national average. In addition, while Florida and California still have high subprime fraud scores, Florida has dropped to sixth place, and California is in eighth. In the past, the report states, “fraud rates from California and Florida have led the nation by a substantial margin.” MARI’s report is based on information submitted to the association over the past nine years from major mortgage lenders, the secondary market agencies and insurers concerning incidents of alleged mortgage fraud. The information has been collected in MARI’s database called the Mortgage Industry Data Exchange (MIDEX) which tracks the locations of properties backing loans where the reported incidents of fraud occur. MARI opines that early payment defaults – loans that become delinquent more than 90 days in their first year – indicate possible fraud, and it advises subprime lenders operating in the states “would be well-advised to take appropriate actions to address this problem” including underwriting, servicing and borrower education. While early payment defaults do not necessarily involve fraud, MARI says “many such loans contain some form of misrepresentation and should not have been made.” MARI’s MIDEX system doesn’t track identity theft directly, but the association said it recognizes that that type of fraud “is becoming increasingly common and had generated so many problems for consumers and financial institutions that the federal government has been taking a keen interest.” According to a Federal Trade Commission survey in late 2003, more than 27 million consumers reported being victimized by identity theft in the past five years. Even more alarming is the fact that 36% of the cases reported occurred in the past year. -