Nevada leads nation in mortgage fraud risk, analyst says


Americans with jobs and money are fleeing expensive urban markets in favor of affordability, more space, and warmer climates – a recipe that has placed Las Vegas in the top five hottest markets for the world. immigration, according to analyst Core Logic.

But Nevada leads the nation’s states and southern Nevada leads metropolitan areas in mortgage fraud risk, thanks to rapid increases in house prices, an increase in home loans instead. than refinancing and the potential for misrepresentation of occupancy, according to CoreLogic. second quarter risk report.

“Frankly, I’m not surprised because loan applications have to generate income and the Las Vegas economy has jobs where there is a lot of undocumented income which is quite volatile, unpredictable and maybe also overestimated,” said Vivek Sah, director of the UNLV Lied Center. for real estate. “These factors always increase the risk of fraud, especially when house prices are rising at such a rapid rate.”

The Mortgage Fraud Risk Index is calculated from “fraud risk scores in loan applications in the previous quarter,” according to CoreLogic. Refinances, which pose less risk to lenders than purchase loans, saw “a significant decline” in the second quarter, but were offset by record purchases.

“Although refinances still represent 53% of transactions, they are down from 68% in the previous quarter,” Core Logic reported. “This change in volume towards purchase loans is reflected in the increased risk indicated by the national index.”

The analyst also warned of buyers who could distort their intentions.

Given that government-sponsored lenders “limit the availability of financing for non-primary occupancy, this seems quite likely to increase the motivation for false claims of occupancy, already one of the most significant mortgage fraud risks.” currents, ”says CoreLogic.

Nevada is among the states with the lowest share of owner-occupied dwellings (56.6%), ranking 48th in the country. West Virginia has the highest ranking, with 73.4% of homes occupied by owners, according to the Insurance Information Institute.

The percentage of owner-occupied homes in Nevada peaked at 59.7% in 2008 and fell to 53.6% in 2014, according to the institute.

But what homebuyers report to their insurance company when insuring their property and what they report to a mortgage broker when they apply for a loan don’t always coincide.

Between August 30, 2020 and the same date this year, Las Vegas Realtors reported selling 26,052 homes with mortgages. About 85 percent of buyers indicated that they intended to occupy the properties. The previous year, owners had said they intended to occupy 89% of the 16,473 units sold.

The Nevada Mortgage Division does not require mortgage brokers to report the percentage of refinances and purchase loans closed or occupancy status to the state.

Regulators see no indication of increased fraud, according to Department of Business and Industry spokeswoman Teri Williams.

Attorney General Aaron Ford office said it has not seen a recent increase in mortgage fraud complaints.

Seller’s paradise

CoreLogic, which warned a year ago of falling prices in the Las Vegas market, now ranks southern Nevada fourth hottest metropolitan area in the nation for home buyers.

The median price of a single-family home in July was $ 405,000, up 23%. against $ 330,000 a year ago.

“In 2020, a black swan landed on the real estate industry and created a wave of ‘firsts’,” the report says – lack of construction, record interest rates, aversion to crowded places, demands for remote work, affordability and more space – which Core Logic says is likely to become permanent.

“The big subways are out and the more affordable are here,” the report said.

“The pandemic has created a perfect recipe for Americans who are constantly employed,” said Archana Pradhan, senior economist at CoreLogic. “If there had been another mix of events, for example, if low housing stock was associated with rigidity in employment, we would not have had such a large group of consumers buying a home. feeling empowered to take bold action in their living conditions. “

The report states that buyers who moved in 2020 “often chose a housing market adjacent to their previous location, a more affordable housing market, or both.”

The Riverside-San Bernardino-Ontario metro was at the top of the national immigration list. CoreLogic reports that the “average home price” in the area was $ 436,288 in 2020, compared to $ 989,157 in nearby Los Angeles and $ 812,401 in San Diego,

According to CoreLogic, the desire for a new environment is the main factor driving home buying. Gen Z and Millennials, however, are primarily driven by a need for larger homes that are generally unaffordable on the West and East Coasts, but within their means in states like Colorado, Nevada, and Texas.

According to CoreLogic, ten of the top fifteen markets are in states that have no income tax.

Seven of the fifteen hottest places are in Florida.

Top 15 Immigration Markets

  1. Riverside-San Bernardino-Ontario, CA
  2. Lakeland-Winter Haven, Florida
  3. Myrtle Beach-Conway-North Myrtle Beach, SC-NC
  4. Las Vegas-Henderson-Paradise, NV
  5. Tampa-St. Petersburg-Clearwater, Florida
  6. Port Saint Lucie, Florida
  7. Jacksonville, Florida
  8. San Antonio-New Braunfels, Texas
  9. Deltona-Daytona Beach-Ormond Beach, Florida
  10. Dallas-Fort Worth-Arlington, Texas
  11. Stockton, California
  12. Cape Coral-Fort Myers, Florida
  13. Phoenix-Mesa-Chandler, AZ
  14. North Port-Sarasota-Bradenton, Florida
  15. Greeley, CO

Leaving New York

“For every incoming New York home purchase requisition, nearly six potential buyers have left New York in 2020,” the CoreLogic report states.

The tri-state area tops the analyst’s list of emigration markets, followed by Los Angeles:

Top 15 emigration markets

  1. New York-Newark-Jersey City, NY-NJ-PA
  2. Los Angeles-Long Beach-Anaheim, California
  3. San Francisco-Oakland-Berkeley, California
  4. San José-Sunnyvale-Santa Clara, California
  5. Washington-Arlington-Alexandria, DC-VA-MD-WV
  6. Miami-Fort Lauderdale-Pompano Beach, Florida
  7. Seattle-Tacoma-Bellevue, WA
  8. Boston-Cambridge-Newton, MA-NH
  9. Chicago-Naperville-Elgin, IL-IN-WI
  10. San Diego-Chula Vista-Carlsbad, California
  11. Orlando-Kissimmee-Sanford, Florida
  12. Denver-Aurora-Lakewood, CO
  13. Salt Lake City, Utah
  14. Portland-Vancouver-Hillsboro, OR-WA
  15. Minneapolis-St. Paul-Bloomington, Minnesota-WI

“Urban markets, even in warmer climates, were also on the list for their high emigration activity, possibly due to affordability concerns. For example, Miami had the sixth highest emigration rate and Orlando the 11th, ”the report says.

While economic experts agree that a double-digit appreciation is not sustainable, the warning that “things will return to normal once the pandemic is over” seems more elusive with the discovery of every COVID mutation.

Some suspected mortgage frauds are directly linked to economic aid resulting from the pandemic.

Brandon Casutt, a resident of Henderson, was indicted last year for “allegedly carrying out a scheme to submit fraudulent economic disaster loan (EIDL) applications to the SBA and the Check Protection Program of payroll (PPP) with federally insured banks, resulting in fraudulent obtaining of approximately $ 500,000, which then laundered the funds through friends and family in order to buy a house, ”according to the US Department of Justice.

Casutt ran unsuccessfully in 2018 for Nevada Assembly District 12. His case is pending.

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