econintersect.com
       
  

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 12 March 2017

2016 Ends With Increase In National Fraud Index

from CoreLogic

-- this post authored by Bridget Berg

Mortgage fraud has been relatively low since strong lending controls were spurred in the aftermath of the financial crisis. But there are trends we expect to emerge in 2017 that may change that outlook, and the level of risk, significantly.

At the end of the fourth quarter, the CoreLogic Fraud Index rose to 122, matching its highest level from three years ago (the baseline of 100 is taken from Q3 2010). The fraud index increased at the same time that we saw a 20 plus percent drop-off in Q4 application volumes after the unexpected volume surge in Q3.

The long-term increase in the risk levels is related to increasing risk in purchase transactions and a greater share of purchase transactions in the industry. The loosening of credit policies at GSEs has helped boost higher LTVs. The share of high-LTV purchase loans has increased from 58 percent to 62 percent of all purchases between Q4 2013 and Q4 2016.

In figure 2, you can see a 32 percent increase in the high-LTV purchase segment over time. The Fraud Index value was 153 in Q2 2013 and 202 in Q4 2016.

It makes sense that refis are generally less susceptible to many types of fraud, because there are fewer players involved and it’s harder to manipulate the outcome. Purchase transactions on the other hand are more complex and distribute proceeds outside of the closed loop of financial systems - to property sellers, builders, real estate agents, etc. - instead of the funds going from one financial institution to pay off another. This creates more opportunities and motives for fraud. Examples of opportunities for fraud in purchases include falsified down payments and straw-buyer schemes, while motives for purchases include real estate and loan commissions, contingent transactions, seller profits, and seller distress. Historically, a rise in purchase activity is often mirrored by a rise in mortgage fraud.

CoreLogic Chief Economist Dr. Frank Nothaft expects purchase dollar-volume to rise by 6 percent in 2017 and to account for 68 percent of the total market. Nothaft, and others like the Mortgage Bankers Association, expect a similar purchase to refi mix in 2018 as well. At least one forecast, the MBA’s, puts purchases above 70 percent of the market in 2018.

Higher interest rates, which seem to be a given for 2017, and continued home price appreciation will create affordability challenges and may reignite “fraud for housing" schemes.

A smaller overall origination market, perhaps $1.5 trillion, in 2017 will most likely be accompanied by credit expansion as lenders try to capture a bigger share of a smaller pie and qualify more fringe borrowers. During the past several years, lenders have pulled back overlays that made lending policies more restrictive (and less risky) than agencies allow. One example of an overlay change is the reduction in the use of IRS income verifications. This may have driven our income fraud risk alert to increase 12.5 percent year over year in 2Q 2016.

One final trend that we’re watching: the return of small, non-bank players into the market. These lenders had a larger presence prior to the mortgage crisis. The crash, the end of subprime securitization and hefty buy-back demands winnowed down the number of small players, and for the past decade most of the lending was done by larger, more-regulated banks. But now smaller lenders are coming back into the market.

It will be interesting to see what the Fraud Index looks like in the months to come. Stay tuned.

This blog is based on analysis of loan-application fraud risk the mortgage industry is experiencing as measured quarterly by the CoreLogic Mortgage Application Fraud Risk Index, which is based on residential mortgage loan applications processed by CoreLogic LoanSafe Fraud Manager™.

Source

http://www.corelogic.com/blog/authors/bridget-berg/2017/02/purchase-mortgages-high-ltvs-may-up-fraud-risk-in-2017.aspx#.WLnWjPkrKUk

© 2017 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


search_box

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 Econintersect.com
Main Home
Analysis Blog
Men Without Work
Slow Economic Growth Will Be Around For A Long Time
News Blog
ISIS: Income Has More Than Halved Since 2014
What We Read Today 29 March 2017
The Best Hilarious Prank Ideas For April Fools' Day
February 2017 Pending Home Sales Index Improves?
The Need For Very Low Interest Rates In An Era Of Subdued Investment Spending
America's Missing Workers Are Primarily Middle Educated
The Share Of American Women In The Labor Force Is Slipping Even As It Rises In The Rest Of The Developed World
Infographic Of The Day: Which Countries Are Going In The Right Direction
Early Headlines: Asia Stocks Mixed, Dollar, Oil Up, Gold Down, Article 50 Day, Westinghouse Files Ch. 11, Trump Wants $1B To Start Wall, Russian Protests, China's $8T Shaky Debt, And More
Thirty Plus Terror Suspects And Convicts Not A Rare Occurrence In UK
The Winners And Losers In Trump's Proposed Budget
God and America (Version 3)
Corning's Glass Brimming With Taxpayer Subsidies
Investing Blog
Investing.com Technical Summary 28 March 2017
The Dollar's Coming Impact On Markets
Opinion Blog
Free Immigration Is The Moderate, Common-Sense Position
Macron May Lead But Le Pen Remains The Big Story
Precious Metals Blog
These Gold Stocks Will Produce Much Bigger Gains Than Gold Itself
Live Markets
29Mar2017 Market Close: DOW Closes Down 42 Points, SP 500 Up At Close, Nasdaq Clearly The Winner Closing Up 0.4 Percent, Wall Street Investors Happy
Amazon Books & More






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































 navigate econintersect.com

Blogs

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

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com 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