CoreLogic's new findings are particularly important for credit unions because its mortgage market share has hit record levels, which will most likely increase exposure to mortgage fraud.

The credit union industry's first mortgage market share reached a record high of 8.6% in 2017. That's $30.9 billion spread across 2,849 of the nation's 5,859 credit unions on record in the Callahan & Associates Peer-to-Peer database as of March 31. The industry also posted its 11th consecutive quarter of double-digit loan growth and the highest first-quarter share growth since March 2003.

The CoreLogic Mortgage Fraud Report released in September analyzed the collective level of loan application fraud risk that the mortgage industry experiences every quarter. The report features a fraud risk index, which is based on residential mortgage loan application processes by CoreLogic's predictive scoring technology.

The report's analysis found that during the second quarter of 2017, an estimated 13,404 mortgage applications contained indications of fraud, up from the reported 12,718 in the second quarter of 2016.

“This past year we saw a relatively large increase in the CoreLogic National Mortgage Application Fraud index,” Bridget Berg, a principal of fraud solutions strategy at CoreLogic, said. “If the factors that influenced the increase continue, including a shift to purchase transactions and growing wholesale channel origination activity, it is likely that mortgage application fraud risk will continue to rise as well.”

The mortgage fraud spike surprised fraud consultant Frank McKenna, chief strategist of PointPredictive in San Diego, Calif., considering how diligent mortgage lenders are with verifying and scrutinizing just about every piece of information that a borrower files to get a mortgage.

But it may not be all that surprising to FBI investigators.

Mortgage fraud for profit typically involves industry insiders who use their specialized knowledge or authority, which may make schemes harder to detect. According to federal authorities, current investigations and widespread reporting indicate a high percentage of mortgage fraud involves collusion by industry insiders, including bank officers, appraisers, mortgage brokers, attorneys, loan originators and other industry professionals whose aim is to steal cash and equity from lenders and homeowners. The FBI said it prioritizes fraud for profit cases.

Even though mortgage fraud occurs in less than 1% of mortgage applications, it still is costly because lenders can lose hundreds of thousands of dollars every time it does occur, McKenna said. He noted the mortgage industry is so spooked by fraud that they don't even call it that.

“They call it 'misrepresentation,' which is a very nice and kind way to refer to fraud,” he said.

In addition to the rising trend of mortgage fraud, Berg pointed out that fraud on cash-out refinance transactions and home equity loans may become a bigger problem in the coming years as home values and equity rise.

Her prediction may be on the mark. Approximately 10 million consumers are expected to originate HELOCs between 2018 and 2022, which would more than double the 4.8 million HELOCs originated in the previous five-year period (2012 to 2016), according to a TransUnion study released last month.

Nevertheless, the first market factor that influenced mortgage fraud risk included a continued shift from what had been a very refinance-heavy market to a purchase market. From the 2016 second quarter to the 2017 second quarter, the proportion of purchase transactions increased from 55% to 66% of applications. Forecasts are for this trend to persist, according to CoreLogic.

“Purchase transactions have higher risk due to the stronger motivations and increased opportunities to commit mortgage origination fraud,” the report said.

The second factor leading to higher fraud risk was a 48% increase in the share of loans that originated through wholesale channels from 5% to 7.3%. Traditionally, wholesale applications have shown a higher risk level than retail channels.

Occupancy, transaction and income fraud substantially increased from the second quarter of 2016 to the second quarter of 2017.

Occupancy fraud, which occurs when mortgage applicants misrepresent their intended use of a property as their primary residence, secondary residence or investment, rose by 7%, according to the CoreLogic report. States that saw the largest year-over-year increases in occupancy fraud risk were Hawaii, Colorado, Nevada, Montana and Nebraska.

Transaction fraud, which happens when the nature of the transaction is misrepresented such as undisclosed agreements between parties and falsified down payments, increased by 3.9%. States with the largest year-over-year increase in this type of fraud included South Dakota, Wyoming, Montana, New Hampshire and North Dakota.

And income fraud, when applicants lie about how much money they are earning to qualify for the mortgage loan, increased by 3.5%.

The report, however, contained some positive trends.

Property fraud, when information about the home or its value is misrepresented, declined by nearly 2% over from the second quarter of 2016 to the second quarter of 2017. CoreLogic reported the states that saw the largest year-over-year increases in property fraud risk included Wyoming, Washington, D.C., Vermont, New Mexico and Alaska. Likewise, falling by nearly 3% was undisclosed real estate debt fraud that occurs when a loan applicant fails to disclosed additional real estate debt such as mortgages and real estate taxes. North Dakota, Nebraska, Iowa, Wyoming and Indiana posted the largest increases in undisclosed real estate debt.

States with the largest year-over-year increases in identity fraud risk were Maine, Alaska, Michigan, Montana and South Dakota.

Bob Dorsa, president of the American Credit Union Mortgage Association headquartered in Las Vegas, declined to comment on the CoreLogic report.