Top 10 states for mortgage fraud

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Mortgage fraud rose dramatically in some states in 2012, and investigations were up, too, according to two recent reports. Scams involving foreclosed properties are particularly rampant.

Florida led the way by a large margin, with eight times the number of expected investigations, according to the LexisNexis Mortgage Fraud Index. Nevada came in second, with just more than 2.5 times the number of expected investigations. Those two states showed some of the worst declines during the collapse of the housing bubble.

The most common type of mortgage fraud involves false information on applications, according to the FBI. This category includes incorrect borrower names, lies about the borrower’s job or income, misrepresentations about debts or assets, mismatched signatures, invalid Social Security numbers, and untruths about occupancy — in other words, the borrower says the home will be a primary residence when it’s really an investment property.

Top 10 states for mortgage fraud

State 2012 rank 2011 rank
Florida 1 1
Nevada 2 2
Arizona 3 3
Delaware 4 18
Illinois 5 8
New Jersey 6 10
California 7 7
Michigan 8 4
Georgia 9 6
New York 10 11

Source: Financial Crimes Enforcement Network.

Other common types of fraudulent activity include:

  • Lying on tax returns and financial statements.
  • Appraisal fraud.
  • False information about the borrower’s bank deposits.
  • Faked verifications of employment.
  • Fraudulent escrow or closing documents.
  • Falsified credit documents.

Throwing homeowners an anvil instead of a life preserver

In addition, fraud targeting distressed property owners is on the rise. The Financial Crimes Enforcement Network reports a 58 percent rise in foreclosure-related fraud in 2012, where scammers offered some sort of “rescue” plan to distressed homeowners.

When the numbers of mortgage fraud originating solely in 2012 are examined, Ohio ranks No. 1 on the index, indicating a recent spike in activity in that state. New Jersey is second for highest number of mortgage fraud investigations originating in 2012.

See the top 10 states for reported mortgage fraud, according to the LexisNexis Mortgage Fraud Index, with their ranking in 2012 versus 2011 in the chart to the right.

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