Fraud By State

California drops off MARI index\'s top ten
By COCO SALAZAR
5/18/2005

Rapid home appreciation may be masking fraud in some markets, but not in the Sooner State.

The Mortgage Asset Research Institute recently updated its MARI Fraud Index, which reportedly is a measure of how pervasive fraud is in a state or geographic area. The index is based on analysis of alleged fraud information and incidents, relative to that area's overall population, reported by major mortgage lenders, secondary market agencies and insurers to its MIDEX database. The recent analysis reflects alleged fraud on loans originated from 2001 to 2004, but the last year's data is not concrete as fraud is usually detected some time after the loan is originated.

The 10 states with the highest levels of fraud were Georgia, Florida, South Carolina, Utah, Nevada, Colorado, Michigan, North Carolina, Missouri and Illinois, in that order, according to the Fraud Index as of the end of 2004. Georgia's Fraud Index score was 306 -- way above the 207 to 224 range for the top second to fifth states and the 136 to 186 levels for the last half of the top 10.

In analyzing all 50 states, Arizona, Indiana and California also had scores in the 100s, the rest had scores below 100 with the lowest being zero for Maine and Vermont. The Index statistics showed Idaho fraud decreased by the most -- as it fell 12 spots from the previous ranking to No. 37 -- and rose the most for Oklahoma -- as it climbed six spots to No. 24.

While the top six states remained the same from the previous ranking, as of Sept. 31, 2004, some fared worst and others better. South Carolina climbed two spots from its prior ranking to pick up the bronze medal Florida left behind for the silver that was previously held by Nevada.

The newcomers amongst the top 10 on the updated list were Michigan at No. 7 and North Carolina as the eighth, both climbing four spots from the previous ranking.

Maryland was bumped to No. 16 -- sliding seven spots below its previous level -- the second largest slide after Idaho.

California was traditionally one of the states with the most alleged fraud, MARI vice president Bill Matthews told MortgageDaily.com, adding that he "was quite surprised California dropped way off." The Golden State took a walk with Maryland outside of the top 10, falling to No. 13 from its previous No. 8 rank.

Matthews noted, however, that "both [the East and the West] coasts are seeing tremendous house appreciation." So, although statistics show fraud has decreased, for states like California, "fraud is still out there," only "the original fraud is being masked by the appreciation in property values."

A May FBI analysis of industry surveys and data reportedly showed the "Top 10 Hot Spots" for mortgage fraud incidents were in California, Colorado, Florida, Georgia, Illinois, Michigan, Missouri, Nevada, South Carolina and Utah. Thus, the difference, when compared to MARI's recent data, is that California incorporated a top 10 spot and North Carolina did not.

Special Programs