The proprietors of a new mortgage loan-processing database to detect fraud and potential ID theft risk patterns found out last week the impact of tightening credit conditions at U.S. lenders. According to an inaugural mortgage loan fraud report issued by the ChoicePoint-owned Mortgage Asset Research Institute, subscribers to its data reported a 42 percent jump in incidents of mortgage fraud, which include income, employment, appraisal, occupancy or “general application” misrepresentations. The data polled numbers comparing the first quarter of 2008 to reported fraud numbers of 2007.

Faked tax returns, stolen identities, and falsified bank statements or deposit verification are also becoming more problematic in mortgage fraud, are exacerbated by the housing downturn, which the FBI’s 2007 Mortgage Fraud Report noted has created “an ideal climate for mortgage fraud perpetrators to employ a myriad of schemes suitable to a down market.”

The institute found the most problems in Florida, California, Illinois, Maryland and Michigan, with each facing unique fraud patterns. In California, employment misrepresentation is the most problematic, while Maryland has “an abnormally high percentage” of fraud incidents (69 percent) related to tax return  and statement falsehoods.

“As the nation’s lenders redraw their credit practices,” the report states, “we see a continued need to highlight and eliminate loans that are not in good order at the point of origination, well before prefunding processors spend any effort to seek added verification or validation of the mortgage application information.

A copy of the report is available here:

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