Nevada again ranked No. 2 for mortgage fraud

Its real estate market may be recovering, but that doesn’t mean Nevada has escaped high levels of mortgage fraud.

The Silver State ranked No. 2 for the fourth straight year on LexisNexis Risk Solutions’ Mortgage Fraud Index, which measures investigations of fraud among mortgage professionals.

The report didn’t break down all types of mortgage fraud in every state, but it said in general that banks’ lending criteria are behind the problem. Fifteen percent of Realtors reported having clients in 2013 who couldn’t close a pending sale after they failed to qualify for a loan, LexisNexis said.

“Despite relatively stable market conditions and continued low mortgage rates, strict credit conditions and requirements still exist for homebuyers,” the study said. “It is not difficult to recognize the connection between tight credit approval guidelines, industry professionals looking to make a profit and mortgage application fraud, the most common type of reported mortgage fraud by far in 2013.”

The Nevada Attorney General’s office didn’t provide any numbers mortgage fraud statewide, but spokeswoman Beatriz Aguirre said the agency’s Mortgage Fraud Unit “actively investigates and prosecutes mortgage fraud in the state of Nevada.”

“In addition to the prosecutorial duties, the fffice actively promotes awareness of these crimes by releasing consumer alerts on trending scams including tips on how consumers can protect themselves from scams,” Aguirre said.

The office’s Home Again: Nevada Homeowner Relief program also has housing counselors who refer fraudulent mortgage practices for investigation.

Nationally, nearly 75 percent of loans referred for investigation nationwide in 2013 involved mortgage application fraud, the LexisNexis analysis said.

Misrepresentation on credit information gained the most among fraud types, jumping to 17 percent in 2013. That was up from 5 percent in 2012. Other categories of fraud measured involved information on tax returns and employment verification.

Fraud involving property appraisals hit a five-year low in 2013 of 15 percent, down from 26 percent in 2012 and 33 percent in 2010. Tim Coyle, LexisNexis Risk Solutions’ senior director of financial services and coauthor of the fraud report, traced the decline to new appraiser-independence regulations in federal laws.

Despite the state’s high rank, Nevada’s overall index score fell slightly year over year, to 221. That was down from 232 in 2012, and 294 in 2011. A score of 100 would mean that fraud rates were in line with the number of loan originations in a state.

Florida has led the list for the last five years. Its 2013 index score was more than double Nevada’s, at 529.

Don’t expect mortgage fraud to abate significantly anytime soon, LexisNexis concluded.

“It is clear that the financial environment resulting from the 2008 housing market crises remains a breeding ground for origination fraud. The reduced volume of consumers who are able to qualify for mortgage loans has led to a fiercely competitive and, in some ways, familiar fraud-for-profit marketplace in which fraudsters resort to dishonest practices in order to fabricate creditworthiness and close deals. Ultimately, fraud and misrepresentation, especially in the mortgage application process, is likely to remain a serious and ongoing national problem.”

Contact Jennifer Robison at jrobison@reviewjournal.com. Find on Twitter: @J_Robison1.