Home mortgage fraud is on the rise, ranging from in-depth scheme to small lies about the property. Overall fraud risk is up by 16.9% in the last year tracked by data analytics firm CoreLogic.
The risk of “occupancy” misinformation, where “applicants deliberately misrepresent their intended use” of the property is one of the fastest rising risks. This includes instances where applicants lie about whether they intend to live in the house or rent it out in order to qualify for lower interest rates. Even though 30% of Americans report wanting to own a house of their own, rent is still a tempting source of income that leads many people down a fraudulent path.
In 1 of every 122 mortgage applications, fraud was found during the first two quarters of 2017. During the same time period in 2016, 1 of every 143 loan applications contained signs of fraud, according to CoreLogic’s senior director of fraud solutions strategy, Bridget Berg.
Last year, CoreLogic estimated more than 13,000 applications had indications of fraud in the second quarter alone. Among the different types of fraud tracked by Berg’s company were misrepresentations of income amounts, employment, undisclosed debts, sources of down payment money, and games played with appraisals.
In a statement, Berg said “Keep in mind, however, than in historical terms, fraud, overall, is still relatively low.”
Along with CoreLogic, other companies confirm that fraud has increased significantly. Mark Fleming, chief economist for First American Financial, says the recent attack on Equifax, where files on 145.5 million consumers were hacked, could lead to far worse forms of application fraud.
Commenting on the range and depth of information stolen from Equifax consumers, Fleming said, “The risk of identity-based fraud and misrepresentation is certainly elevated. To the extent that the more people who have their information out there, the greater the danger.”
Unfortunately, cyber attacks are fairly common. In 2016, every day between January and June more than 4,000 ransomware attacks occurred, according the the FBI. While they range in size and severity, businesses are taking more and more security measures to reduce the risk of being hacked.
The slow-moving pace of consumers to protect themselves from mortgage or credit card fraud by locking their files could further increase the risk of fraud. According to Avivah Litan of Gartner Research, it’s estimated that only 2 to 3% of consumers have freezes on their credit files.
With the detailed and sensitive information that hackers may now possess on millions of Americans, they may be able to create fake identities and apply for credit cards and other mortgages in those consumers’ names.
While 59% of homeowners wish they had a better understanding of the details of their mortgage, according to data collected in September of 2016, it’s now a concern that people won’t even be able to apply for mortgages at all if hackers ruin their credit scores and put them in significant debt.
Consumers considering applying for any sort of loan should be aware that any form of mortgage fraud may constitute bank fraud, which is considered a federal crime. Consumers are advised to take precautionary measures, including freezing credit reports, to reduce the risk of being a victim of fraud.