Mortgage Fraud Risk Is Up 7.3% In The Past Year

Cotality released its National Mortgage Application Fraud Risk Index for the first quarter of 2025, revealing that fraud risk is up 7.3% year over year while dropping slightly from the last three months of 2024

The largest year-over-year increase in Q1 2025, according to Cotality, was in the transaction risk category, which rose 4.6%. This applies to mortgage applications in which elements of a home purchase transaction were not fully represented to the lender. Hidden sales concessions, non-arm’s-length sales and rapid property flipping are examples of transaction fraud.

“While mortgage delinquencies are currently low across the U.S., the market is ripe for an increase in fraud because of the continuing high interest rates, slow housing market and other increasing costs of homeownership like insurance affordability,” Matt Seguin, Cotality’s senior principal for fraud solutions, said in a statement.

“If market conditions continue to challenge sellers, risks like misrepresented down payments, inflated prices, and straw buyers could increase dramatically.”

Overall, mortgage application activity in Q1 2025 remained steady compared to Q4 2024 and the purchase loan share remained high at 67% of all transactions. Similar to the prior quarter, the share of government loans increased, inching up to 26% of all applications.

According to Cotality’s report, the three metro areas with the highest fraud risk were Albany-Schenectady-Troy, New York (up 82% from Q4 2024 to Q1 2025); Poughkeepsie-Newburgh-Middletown, New York (up 37% ); and New Haven-Milford, Connecticut (up 30%).