In the wake of the housing market collapse, mortgage fraud was a serious concern that plagued the real estate industry. However, according to a recent report from Interthinx, during the first quarter, the risk of mortgage fraud fell to the lowest mark seen since the middle of 2009.
Specifically, the Mortgage Fraud Risk Index dipped 4.3 percent from the previous quarter and 3.1 percent from a year earlier. This is the first time the index, which is based on how often suspicious activity is detected in the mortgage industry, fell below the 140 mark in nearly three years.
Employment, income fraud on the rise
However, even though the potential for mortgage fraud is on the decline, the report indicated that employment and income fraud continue to pose as threats to the housing market's recovery. To help combat these rising risks, Interthinx announced it plans to launch a new program to return safety and soundness to the industry.
"Our risk mitigation experts have been diligently monitoring the rise in the Employment/Income Fraud Risk Index," said Interthinx president Kevin Coop. "In response to and in step with our continued commitment to provide highly effective risk mitigation technology, Interthinx plans to release enhanced functionality within FraudGUARD that will allow lenders to reverify a borrower's income at least ten days before closing."
Mortgage rates reach new lows
The report added that falling mortgage rates recently caused a surge in refinancing activity, and this could have played a major role in declining frequency of home loan fraud. Freddie Mac's most recent Weekly Application Survey reports that the average rates for both 30- and 15-year fixed-rate mortgages reached new all-time lows during the week ending May 31.
During this period, the rate for a 30-year FRM averaged 3.75 percent after dropping from 3.78 percent the previous week. Last year at this time, the rate averaged 4.55 percent. In addition, the rate for a 15-year FRM dropped to 2.97 percent, down from 3.04 percent a week earlier. This is the first time the rate for a 15-year FRM has fallen below 3 percent in survey history.
Economic uncertainties spur decline
One expert from the government-sponsored enterprise says that global economic fears may have played a major role in the decline.
"Market concerns over tensions in the Eurozone led to a decline in long-term Treasury bond yields helping to bring fixed mortgage rates to new record lows this week," said Freddie Mac vice president and chief economist Frank Nothaft.