Signs or suggestions of fraud in mortgage applications fell during the first half but were above the national average in the West, according to a recent study.

Arizona, California, Colorado, Idaho, Nevada, Oregon, and Utah were among the top 10 states in red flags for mortgage fraud, according to Mortgage Asset Research Institute Inc., Reston, Va. The state of Washington ranked 11th.

Nationwide the indicators fell to 2.3% of applications in the half, from 3.0% in the second half of 1997.

Applications from the sameborrower to more than one lender -not considered a sign of fraud-also fell, to 2.9% from 4.0%.

The institute tracks fraud indicators for 15 major lenders. It looks for, among other things:

Someone applying for mortgages on two houses, in both cases claiming to be the owner-occupier.

Someone applying for first and second mortgages simultaneously without telling either lender about the other application.

Two people applying for loans on the same property at the same time.

Lenders feed their applications into the research company's data base, which spots suspicious matches.

The high incidence of alarm bells in the western states partly reflects strong property markets there, Mr. Croft said. "A hot market breeds a certain amount of enthusiasm for getting into residential property ownership as an investment rather than shelter. People may try to stretch themselves too much."

Bill Matthews, a managing director at the company, added that there have been large migrations from California to the other western states recently, and that California itself has always been a hot spot for mortgage fraud, regardless of economics.

However, some of the concentration of fraud indicators in those states reflected overlap among lenders contributing data, Mr. Croft said.

Though it is not illegal for the same borrower to submit applications to more than one lender, the practice can create unnecessary processing costs. It can cost as much a $1,000 to prepare and a lock in a loan when hedging expenses are factored in; if another lender winds up making the loan, that $1,000 goes down the drain.

Mr. Croft claimed some credit for the decline in multiple submissions. Because of his company's service, he said, "our clients are managing their brokers more closely."

The company hopes to increase the number of subscribers. "The more people who cooperate, the more powerful the data base," said Jim Croft, its executive director. The Mortgage Bankers Association of America has endorsed the service, and its members get reduced subscription fees.

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