Troubling trend emerges in Ohio for mortgage fraud

Ohio ranks high in a new report for mortgage fraud rates.

LexisNexis Risk Solutions ranked Ohio first in the U.S. on an index that compares the level of mortgage fraud reported and verified and the volume of mortgages originated in 2012.

Ohio has a five-year high of 224 on LexisNexis’ Origination Mortgage Fraud Index. The information services company says the index indicates that Ohio had more than two times the rate of mortgage fraud and/or misrepresentation than what would be expected based on the size of Ohio’s mortgage market.

Originations include new home purchases, refinances and home equity loans.

In prior years, Ohio didn’t rank in the top 10 on the index, according to LexisNexis.

“Your fraud is going up,” even though fraud nationally as a whole is dropping, said Tim Coyle, senior director of financial services for LexisNexis Risk Solutions.

Coyle couldn’t explain exactly what might be causing fraud in Ohio to rise. But, he said LexisNexis found the type of fraud rising nationally is application fraud or misrepresentation on a mortgage application.

Sixty-one percent of fraud reported on home loans signed in 2012 was related to applications, Coyle said. As a share of types of fraudulent activity, that’s up from 49 percent of application fraud for loans originated in 2011 and 43 percent of loans originated in 2010, he said.

The game has changed since before the onset of the housing crisis in late 2007. People are committing fraud in effort to own a house. Before, fraud was committed for profit, he said.

“The credit requirements are much tougher than it was in the past. They don’t just let anybody with a heartbeat get a loan anymore,” he said.

Mortgage interest rates in 2012 dropped to the lowest on record. Home prices were still depressed.

“It tells you a lot of people are going to want that rate,” he said. “You saw a lot of fraud on the front end. Application fraud usually involves people lying about income” and verification of assets.

The findings come from “The LexisNexis 15th Annual Mortgage Fraud Report” released Tuesday. Major mortgage lenders, agencies and insurers submit information describing incidents of verified fraud and material misrepresentation committed by consumers and industry professionals to an industry database, known as Mortgage Industry Data Exchange. LexisNexis Risk Solutions said it operates the MIDEX and analyzes submissions for mortgage fraud characteristics.

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