Further light has been shed on why Rhode Island has been one of the hardest hit state economies by the foreclosure crisis. Yesterday, the Mortgage Asset Research Institute released a report showing that Rhode Island had the highest rate of mortgage fraud in the country.
The report, prepared for the Mortgage Bankers Association, compared the number of fraud cases reported in an industry data base with the total number of mortgage loans originated last year. A state whose fraud rate matched the national average would receive a score of 100, while higher scores indicated higher-than-average fraud rates.
Rhode Island’s score, 315, means that it had more than three times its share of mortgage fraud cases as it should have for the number of loans originated here. Florida dropped to second, with a score of 279.
The report also detailed the various kinds of fraud:
The research institute rated states on seven types of fraud in the mortgage process: application, tax return/financial statements, appraisal/valuation, verification of deposit, verification of employment, escrow/closing documents and credit report.
The biggest source of cases in Rhode Island was appraisal/valuation fraud, which accounted for 38 percent of the cases. That was followed by application fraud, 31 percent, and tax return/financial statement fraud, 23 percent.
And Rhode Island’s position at #1 was a byproduct of growing fraud:
Since 2004, Rhode Island has been steadily on the rise. In that year, it ranked 41st, with a score of 16, meaning it had only about one-sixth its share of mortgage fraud cases. In 2005 and 2006, Rhode Island ranked 18th. And in 2007 it climbed to 5th.
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