“It makes sense if someone owns an investment property, more than likely they own more than one property at a higher rate than somebody who is doing just a primary residence,” Seguin said. “That also gets into the two loans at the same time, going to two different lenders, and they don’t know about it, kind of thing. Six months down the line, Fannie Mae calls it out. And that’s challenging for lenders to watch for and know when those are happening.”
Refinances increased by 19% year-over-year, which helped to keep the increase in fraud risk a bit lower. Refis traditionally have a lower risk of fraud, which then lowers the fraud index, according to Seguin.
“The most interesting part of the data is we saw refinances go up year over year, and historically, the refinances drive the index lower,” he said. “The opportunity (for fraud) is not there. They generally don’t have income docs. They generally don’t have assets and appraisals. There’s not much left to alter at that point.”
Risk categories to monitor
While several fraud risk categories decreased, each had a fraud type that appeared on Cotality’s radar in Q4.
The first is income, with an increase in alerts related to employer information that couldn’t be verified by phone or address.
