Chicago Zip Code Remains Riskiest For Mortgage Fraud For Third Straight Quarter
February 18th, 2011
While it is problematic enough that Chicago’s 60621 zip code has been rated the most at-risk for mortgage fraud in the country for three straight quarters, what is perhaps more disturbing out Interthinx Mortgage Fraud Risk Report numbers are the way that the risk appears to spread. According to the data-tracking firm’s analysis, Chicago as a whole has increased when it comes to risk of mortgage fraud from “moderate” in second-quarter 2010 to “very high risk” by the end of 2010, indicating that “ ‘very high’ risk at the zip code level can, in a short period of time, spread and elevate the overall risk of much larger geographies”[1]. Kevin Coop, Interthinx’s president, cited employment/income and identity fraud risk as accompanying factors to mortgage fraud, and recommended that lenders in all areas “be more vigilant about using fraud detection systems during refinancing, modifications and purchase transactions that involve the resale of distressed properties.”
Interthinx considers fraudulent activity to be misevaluations, employment misrepresentation or concurrent closing schemes. Normal fraud risk would be 100. Chicago has a fraud index of 568[2]. “Professional real estate investors” are cited as common perpetrators in particular of occupancy fraud because, according to some sources, they may “falsely claim the intent to occupy the purchased property to obtain lower interest rates or down payments on a mortgage.” This strategy index declined throughout the country over the past year, but many investors believe it is unreasonable to consider it fraud. What do you think? Should real estate investors be forced to pay higher down payments and interest rates if they plan to turn the property for a profit rather than live in it?
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[1] http://nationalmortgageprofessional.com/news23707/interthinx-report-finds-mortgage-fraud-rise-windy-city
[2] http://www.housingwire.com/2011/02/17/chicago-tops-for-mortgage-fraud-infection-interthinx
February 20th, 2011 at 8:20 AM
Real estate investors should absolutely not be forced into paying higher down payments and interest rates if they’re turning properties for a profit. They’re doing business just like anyone in the real estate industry only they’re able to do it much better in the current stagnated real estate economy.