2018 Mortgage Fraud Report - corelogic.com

1 | 2018 Mortgage Fraud Report September 2018. g 2018 Mortgage Fraud Report SEPTEMBER 2018. i 2018 corelogic Proprietary. This material may not be reproduced in any form without express written permission. Table of Contents | 2018 Mortgage Fraud Report September 2018. g Table of Contents Fraud National Overview National Mortgage Fraud Risk Overview Factors Affecting Fraud National Mortgage Fraud Indicators Mortgage Fraud Out-Of-State Investors Mortgage Fraud Employment Tenures Less Than One Year Multi-Closing Fraud Mortgage Fraud Risk By State Mortgage Fraud Risk By Geography National Mortgage Fraud Methodology ii 2018 corelogic Proprietary. This material may not be reproduced in any form without express written permission.

2 2018 Mortgage Fraud Report September 2018 | Analysis g Fraud Report National Overview New York, New Jersey, and Florida remain the top 3 states for Mortgage application Fraud risk, maintaining the same positions as last year. All the top The corelogic Mortgage 10 states showed increases in risk year-over-year. Fraud Report analyzes the collective level of The states with the greatest year-over-year growth in risk include New Mexico, loan application Fraud risk Mississippi, Illinois, Oklahoma, and Texas. Of these, New Mexico, Illinois and the Mortgage industry is Oklahoma now have risk levels greater than the National Index, which grew experiencing each quarter. from 133 to 149 year-over-year. corelogic develops the The Conforming LTV 80 purchase segment shows the greatest risk increase index based on residential by loan type.

3 Mortgage loan applications processed by corelogic Income Fraud risk had the greatest increase year-over-year, followed by LoanSafe Fraud Manager , Occupancy and Transaction Fraud . Property and Undisclosed Real Estate a predictive scoring Debt showed declines in risk. technology. The Report includes detailed data for six Fraud type indicators that complement the national index: identity, income, occupancy, property, transaction, and undisclosed real estate debt. During the second quarter of 2018, an estimated percent of all Mortgage applications contained Fraud , which is 1 in 109 applications. By comparison, in the second quarter of 2017, our estimate was percent, or 1 in 109. Mortgage APPLICATIONS ESTIMATED TO.

4 1 in 122 applications. HAVE INDICATIONS OF Fraud IN Q2 2018. Mortgage application Fraud Risk The corelogic Mortgage Application Fraud Risk Index increased percent Index nationally from the second quarter 2017 to the second quarter of 2018. The index has increased for each of the last seven quarters and has been on a long-term upward trend from Q3 2010. This year's increase is attributed to a smaller share of low-risk applications, such as rate reduction refinances. Q2 2018 COMPARED TO Q2 2017. 2018 corelogic Proprietary. This material may not be reproduced in any form without express written permission. 1. Analysis | 2018 Mortgage Fraud Report September 2018. g Nat Mortgage app Fraud index over time National Mortgage Fraud Index Risk Overview All loan segments showed increased risk year-over-year.

5 Purchase transactions show higher risk levels than refinance transactions except for Jumbo loan segments. The risk index for Jumbo Refinance is 266 compared to 235 for Purchase. Volumes in the Jumbo Refinance segment had the largest relative decrease year-over-year. NATIONAL Mortgage APPLICATION Fraud INDEX OVER TIME. 160. Nat Mortgage application Fraud index by loan segments p 150. 140. 130. 120. 110. 100. 90. 80. 2010-Q3. 2010-Q4. 2011-Q1. 2011-Q2. 2011-Q3. 2011-Q4. 2012-Q1. 2012-Q2. 2012-Q3. 2012-Q4. 2013-Q1. 2013-Q2. 2013-Q3. 2013-Q4. 2014-Q1. 2014-Q2. 2014-Q3. 2014-Q4. 2015-Q1. 2015-Q2. 2015-Q3. 2015-Q4. 2016-Q1. 2016-Q2. 2016-Q3. 2016-Q4. 2017-Q1. 2017-Q2. 2017-Q3. 2017-Q4. 2018-Q1. 2018-Q2. Note: The blue is a trend line.

6 NATIONAL Mortgage APPLICATION Fraud INDEX BY LOAN SEGMENTS: PURCHASE. 350. 300. Nat Mortgage application Fraud index by loan segmen 250. 200. 150. 100. 50. 0. 2010-Q3. 2010-Q4. 2011-Q1. 2011-Q2. 2011-Q3. 2011-Q4. 2012-Q1. 2012-Q2. 2012-Q3. 2012-Q4. 2013-Q1. 2013-Q2. 2013-Q3. 2013-Q4. 2014-Q1. 2014-Q2. 2014-Q3. 2014-Q4. 2015-Q1. 2015-Q2. 2015-Q3. 2015-Q4. 2016-Q1. 2016-Q2. 2016-Q3. 2016-Q4. 2017-Q1. 2017-Q2. 2017-Q3. 2017-Q4. 2018-Q1. 2018-Q2 CONFORMING: LTV 80 JUMBO: LTV 80 LTV 80 100. Definitions Source: corelogic 2018. The Conforming LTV 80 segment consists of applications for owner- NATIONAL Mortgage APPLICATION Fraud INDEX BY LOAN SEGMENTS: REFINANCE. occupied mortgages with Loan- 300. To-Value (LTV) less than or equal to 80 percent and a loan amount less 250.

7 Than or equal to the conforming 200. loan limit. 150. The Jumbo LTV 80 segment contains applications for owner- 100. occupied mortgages with LTV less 50. than or equal to 80 percent and a loan amount greater than the 0. conforming loan limit. 2010-Q3. 2010-Q4. 2011-Q1. 2011-Q2. 2011-Q3. 2011-Q4. 2012-Q1. 2012-Q2. 2012-Q3. 2012-Q4. 2013-Q1. 2013-Q2. 2013-Q3. 2013-Q4. 2014-Q1. 2014-Q2. 2014-Q3. 2014-Q4. 2015-Q1. 2015-Q2. 2015-Q3. 2015-Q4. 2016-Q1. 2016-Q2. 2016-Q3. 2016-Q4. 2017-Q1. 2017-Q2. 2017-Q3. 2017-Q4. 2018-Q1. 2018-Q2. The LTV 80 100 segment consists of applications for all mortgages with LTV greater than 80 percent, but less CONFORMING: LTV 80 JUMBO: LTV 80 LTV 80 100. than or equal to 100 percent. Source: corelogic 2018.

8 2 2018 corelogic Proprietary. This material may not be reproduced in any form without express written permission. 2018 Mortgage Fraud Report September 2018 | Analysis g Factors Affecting Fraud Risk hare of single family originations %. Market factors that influenced Fraud risk during the previous year include: The continued shift from a refinance-heavy market to a predominantly purchase market is a key factor in the application Fraud risk increase. From Q2 2017 to Q2 2018, the proportion of purchase transactions within the consortium increased from 66 percent to 72 percent of applications. While the shift from refinance to purchase transactions is still forecast to continue, it may be nearing its maximum. Purchase transactions have shown a higher risk profile than refinances due to the stronger motivations to commit Fraud .

9 SHARE OF SINGLE-FAMILY ORIGINATIONS. (Percent). 80% Forecast forming Limit 70%. 60%. 50%. 40%. 30%. 20%. 10%. 0%. 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018. Home Purchase Home Refinancing Home Improvement Source: HMDA (2000 2016), corelogic public records (2017), average of MBA, Freddie Mac, Fannie Mae projections (2018 2019). The second factor leading to an increase in Fraud risk was a percent increase in the share of loans originated through Wholesale channels, from percent to percent year-over-year. Wholesale applications have shown a higher risk level than other channels, and the increase in Wholesale lending continues to impact the National Index. Note the lower risk for Correspondent loans is due to ordering reports later in the loan process.

10 Many high-risk transactions have fallen out of the pipeline by the time the applications are submitted for scoring. 2018 corelogic Proprietary. This material may not be reproduced in any form without express written permission. 3. t Mortgage app Fraud index by loan channel Analysis | 2018 Mortgage Fraud Report September 2018 g NATIONAL Mortgage APPLICATION Fraud INDEX. By Loan Channel 250. 200. 150. olesale loan share 100. 50. 0. 2010-Q3. 2010-Q4. 2011-Q1. 2011-Q2. 2011-Q3. 2011-Q4. 2012-Q1. 2012-Q2. 2012-Q3. 2012-Q4. 2013-Q1. 2013-Q2. 2013-Q3. 2013-Q4. 2014-Q1. 2014-Q2. 2014-Q3. 2014-Q4. 2015-Q1. 2015-Q2. 2015-Q3. 2015-Q4. 2016-Q1. 2016-Q2. 2016-Q3. 2016-Q4. 2017-Q1. 2017-Q2. 2017-Q3. 2017-Q4. 2018-Q1. 2018-Q2.