The boom in refinancing brought mortgage application fraud risk down 26.3% from the second quarter of 2019, according to CoreLogic.

While the overall Fraud Risk Index declined due to the relative safety of refinances, purchase risk rose 6% year-over-year. CoreLogic’s Annual Mortgage Fraud Trends Report showed one in 164 mortgage applications carried fraud indications in the second quarter of 2020. That ratio goes to one in 126 for purchases and one in 200 for refis.

Of the six segments measured, only occupancy fraud risk increased, shooting up 25.8% year-over-year. This ties to applicants misrepresenting their use for the property.

“Investment loan applications are showing a higher risk because real estate investors have a profit motivation for their activity,” Bridget Berg, CoreLogic’s principal of fraud solutions strategy, said in the report. “This introduces other factors and increases the risk compared to a purchase for personal use. Investors often own other real estate and are more likely to have undisclosed ownership and transactions in process.”

Even though the current fraud risk is low, that could drastically change once the refinancing wave subsides and the uncertain repercussions of the pandemic unfold.

At the state level, New York had the highest risk with an index score of 177 in the second quarter. Nevada followed at 155 with Florida just behind at 141. CoreLogic set the baseline of 100 for the index in the third quarter of 2010.

“Fraudsters thrive in uncertain market conditions, where their activities are harder to detect and separate from legitimate investors who are also attracted to variable markets,” said Ann Regan, product management executive at CoreLogic. “Nevada’s economy took a big hit with COVID-induced shuttering of gambling/tourist activities and this is driving a decline in home prices as well as an increase in fraud risk. With many economists predicting a recession later this year or early next year, we can expect to see market variability in other regions and likely an increase in fraud as well.”