FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.

posted on 28 December 2016

There Is A Comeback Of Occupancy Fraud In Reverse

from CoreLogic

-- this post authored by Willa Wei

Traditional occupancy fraud occurs when mortgage applicants deliberately misrepresent their intended use of a property, typically for more attractive financing terms. Investment properties may have lower maximum loan amounts, higher interest rates and higher fees. These differences may motivate a borrower to falsely claim an investment property will be owner-occupied. However, there is a relatively new scheme going on when a low-income applicant intentionally misrepresents occupancy status as an investment (even though the real intention is primary residence), so the expected rental income can be used as part of the applicant’s assets to satisfy the mortgage application debt/income requirement. This is referred to as a reverse occupancy scheme.

The reverse occupancy scheme has some typical characteristics [1], including

  • Subject properties sold as investment properties

  • Purchasers are first-time-home buyers with minimal or no established credit

  • Purchasers have low income but significant liquid asserts authenticated by bank statement

  • Purchasers make a large down payment

CoreLogic analyzed investment purchase mortgage applications in the last five years and identified applications with higher risk of reverse occupancy scheme based on the above four alert characteristics. The percentage of reverse occupancy scheme prevalence is calculated against the investment purchase application population for the top 50 Core Based Statistical Areas (CBSAs), based on U.S. Census population estimates.

The results indicate that among the top 50 CBSAs, New York has higher reverse occupancy risk than any other metro areas. Since 2014, New York’s reverse occupancy rate has increased year over year. The rate reached 13 percent in 2016. Although there are a few other CBSAs in the northeast region that have higher reverse occupancy rates, New York is a hot spot considering both percentage and volume of reverse occupancy.

Figure 1 compares New York’s reverse occupancy risk rate with other large CBSAs, such as Los Angeles, Chicago, Dallas and Houston. It also shows the average reverse occupancy rate at the national level for benchmarking.

When looking at New York state as an example, Figure 2 shows key characteristics of reverse occupancy scheme compared with the total investment purchase population. The reverse occupancy group’s median income is only 20 percent of the total investment purchase group’s median income. However, the loan amount is 40 percent more than investment purchase group. Its loan-to-value ratio and debt-to-income median values are also lower than the median values of the regular investment purchase population.

Interactive Heat Map

One of the key challenges of mortgage fraud is its ever-shifting migration patterns and new schemes. It morphs from one scheme to another depending on changing local economic and real estate market conditions and government programs. As the real estate markets are recovering after the housing crisis, the share of purchase applications continues to increase. GSEs are also expanding credit policies. Both of these trends provide opportunities for the return of known fraud risks as well as new twists and schemes. CoreLogic stands at the forefront of the real estate risk management industry and uses our best-in-class data and analytics to create intelligent, proactive solutions, helping our clients stay ahead of the game.

Contribution from Liang Tian


1 Fannie Mae Mortgage Fraud Program Alert 2016

© 2016 CoreLogic, Inc. All rights reserved.


>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical News Post Listing

Make a Comment

Econintersect wants your comments, data and opinion on the articles posted. You can also comment using Facebook directly using he comment block below.

Econintersect Contributors


Print this page or create a PDF file of this page
Print Friendly and PDF

The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.

Take a look at what is going on inside of
Main Home
Analysis Blog
Slow Economic Growth Will Be Around For A Long Time
The Job Guarantee, Wage-Price Inflation And Alternative Solutions: Part 2
News Blog
Early Headlines: OPEC Strategy Fails, Amazon And State Sales Tax, Tillerson Will Attend NATO, GOP Troubles, Euro Shorts Fading, Marine 'Loves' Vlad, Russia Ready For $40 Oil, And More
The World's Most Boring Jobs
PewDiePie Weathering The Storm
American Doctors: The Prognosis Isn't Good
What We Read Today 24 March 2017
The Federal Reserve Banks Provided $91.5 Billion Remittances To The U.S. Treasury In 2016
17 March 2017: ECRI's WLI Growth Index Shows Continued Moderate Slowing Of Rate of Growth
Durable Goods New Orders Improved in February 2017
Why NASA Won't Send Humans To Venus
Rail Week Ending 18 March 2017: Short Term Rate of Growth Slowing
How Taxes And Transfers Affect The Work Incentives Of People With Low And Moderate Income
How Tourism Affects China's Current Account Surplus
Infographic Of The Day: The Habits Of Highly Successful Entrepreneurs
Investing Blog
Avoiding The Trap Of The Demo Trading Account
Snap's Pre-IPO Revenue Per User In Context
Opinion Blog
Robots, Aliens, Corporate Drones - Who Will Be The Citizens Of The Future?
Is Our Hard-wired Negativity Bias Useful Or Something To Overcome?
Precious Metals Blog
These Gold Stocks Will Produce Much Bigger Gains Than Gold Itself
Live Markets
24Mar2017 Market Close: Trumpcare Collapses But Little Affect On The Markets
Amazon Books & More

.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Middle East / Africa
USA Government



Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day


Asia / Pacific
Middle East / Africa
USA Government

RSS Feeds / Social Media

Combined Econintersect Feed

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution



  Top Economics Site Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2017 Econintersect LLC - all rights reserved