Overall mortgage fraud risk posted a sharp decline at the end of the second quarter of 2020, but purchase applications told a different story.
Record-low mortgage rates and the surge in refinance volume continued to push the overall fraud risk down. The CoreLogic Mortgage Application Fraud Risk Index showed a 26.3% year-over-year decrease at the end of the second quarter – marking the second year of substantial drop in risk.
Throughout Q2 2020, CoreLogic estimated one in 164 mortgage applications, or 0.6% of all applications, contained indications of fraud. This figure was lower than the reported one in 123 mortgages or 0.8% in Q2 2019.
However, risk in purchase applications grew by 6%, with investment properties driving the highest risk in both purchase and refinance segments.
"The large drop in fraud risk in the past year was primarily driven by record-high refinancing, which is traditionally lower risk transactions," said Bridget Berg, principal of fraud solutions strategy for CoreLogic. "However, we still see elevated levels of risk in purchase transactions, and we have not yet seen the long-term impacts of the COVID-19 pandemic, so it's imperative risk managers remain vigilant in searching out potential fraud."
Other key findings of the report: