CNBC recently published the 10 top states for mortgage fraud. Here is the summary.
Mortgage Fraud Index: 20 out of 100
Located outside the nation’s capital, Maryland has an estimated 5.8 million people living within its borders. Sixty percent were homeowners between 2006 and 2010, according to the Census Bureau. In the third quarter of 2011, 153 people were the subject of suspicious activity reports.
9. New Jersey
Mortgage Fraud Index: 25 out of 100
Sandwiched between New York and Pennsylvania, New Jersey is only 7,300 square miles but is home to more than eight million people. Sixty-nine percent owned a home between 2006 and 2010. Between July and September 2011, 247 people were suspected of mortgage fraud in New Jersey.
Mortgage Fraud Index: 27 out of 100
In Georgia, 177 people had a suspicious activity report filed against them in the third quarter of 2011. One trend that’s emerged in Georgia is the builder bailout scheme, Dixon said. It is a complex fraud that involves builders in need of paying off lenders on unsold homes. They “attempt to creatively disguise a fraudulent home sale as a legitimate transaction, colluding with real estate appraisers, mortgage loan brokers, and settlement agents,” according toFreddie Mac’s website.
7. New York
Mortgage Fraud Index: 42 out of 100
More than 19 million people live in the state of New York, which has a mortgage fraud index of 42. Some 510 people in the state were the subject of suspicious activity reports filed in the second quarter of 2011. Dixon sees various types of mortgage frauds occurring in the state but said there tends to be a lot more property-related appraisal frauds in New York City. For example, two-unit homes that are appraised as one, or homes that have had illegal additions.
Mortgage Fraud Index: 42 out of 100
Michigan is not only in the top 10 states for mortgage fraud, it also ranks high when it comes to foreclosures. According to RealtyTrac,the state has a foreclosure rate of 2.21 percent. Between July and September 2011, 212 people were suspected of mortgage fraud activity. Dixon says land-title lien fraud has been on the rise in Michigan over the last two years. That includes fraudulent liens filed on properties and illegal transfers of ownership involving identity theft.
Mortgage Fraud Index: 53 out of 100
Illinois is another state that has been hit hard with foreclosures. It has a rate of 1.95 percent, according to RealtyTrac. In the second quarter of 2011, 383 people in the state had suspicious activity reports filed against them. One of the trends Dixon sees emerging in Illinois is organized crime fraud, where properties are bought under straw-buyer names and are then used for illegal activities such as drug trafficking.
Mortgage Fraud Index: 57 out of 100
Arizona had the second-highest foreclosure rate for 2011, according to RealtyTrac. One in 24 homes had at least one foreclosure filing for the year. The state also has the third-highest mortgage fraud index on the FBI’s mortgage fraud report. Between July and September 2011, 207 individuals had suspicious activity reports filed against them. Like Georgia and Nevada, Arizona has also seen an increasing number of builder-bailout scams, Dixon said.
Mortgage Fraud Index: 61 out of 100
Best known for the casinos of Las Vegas, Nevada has seen its share of housing troubles. In fact, it is the hardest-hit state when it comes to foreclosures, according to RealtyTrac. One in 16 homes had at least one foreclosure filing in 2011. In the third quarter of 2011, 117 people in Nevada were the subject of mortgage fraud reports. Builder-bailout scams is an emerging trend in Nevada, Dixon said, as well as appraisal valuation fraud, which entails a misrepresentation of the appraised value of a property.
Mortgage Fraud Index: 94 out of 100
More than 37 million people live in California, and about 57 percent owned a home between 2006 and 2010. Between July and September 2011, 1,871 people had suspicious activity reports filed against them. Dixon says the state “has a lot of everything” when it comes to mortgage fraud. “It depends on the region,” she said. “Property values took such a hit over the last couple of years.” Identity theft is one common fraud in the state, she said, with people using false names to close on homes.
Mortgage Fraud Index: 100 out of 100
Florida, like many other states, was hit hard with foreclosures and short sales, which is when a house is sold for less than the mortgage balance. In 2011, it had a foreclosure rate of 2.06 percent, according to RealtyTrac. Some 702 people were the subject of suspicious activity reports in the third quarter of 2011. Dixon says that thanks to all the short sales on the market, there has been a sort of “mini-real estate boom” going on. Because of that, there has been a rise in short sale valuation fraud — where real estate brokers don’t disclose higher offers on the house to the bank because they are working with someone else to get it at a lower price. After the house is sold, the property is put back on the market at a higher price. Florida also has seen land-title lien frauds and organized crime frauds emerging as other trends.