Origination News Feature Story

Rhode Island Tops Fraud Rankings

By Lew Sichelman

LAS VEGAS-America's smallest state has something new over its larger counterparts. But it probably doesn't want to brag about it.

For the first time, Rhode Island has been ranked as tops in the country for mortgage fraud, according to the 11th periodic report to the Mortgage Bankers Association by the Mortgage Asset Research Institute. Released here at the MBA's annual National Fraud Issues Conference, the report found that fraud activity based on the book of business originated in the Ocean State was three times the national average. "Future reports will tell if this is a statistical anomaly," said MARI front man Merle Sharick. "But for now, current data suggests that the state has emerged with a problematic and heretofore unnoticed mortgage fraud problem."

RI's rise up the ladder from the fourth position last year knocked Florida down to the second spot. But Nevada and Utah have dropped out of the top 10 altogether. California, too, has dropped, from fourth among the list of hot spots for fraud last year to eighth this year. Florida, Nevada, Utah and California, along with Arizona, have been held out as the poster children for mortgage fraud. But their fall down the fraud ladder suggests that there might not be any more money to be made in those places, so scam artists are taking their talents elsewhere. "What are they going to do?" Mr. Sharick asked about the movement of fraudsters to other states. "Those markets are in real stress. Home values have crashed and the exotic loans are gone."

At the same time, however, Georgia appears to be back in the villains' cross-hairs. After improving its rankings in 2006 and again in 2007, the Peach State rose to fourth last year. In 2004 and 2005, Georgia was the No. 1 target for scam artists. But it was fifth in 2006 and seventh in 2008. Also, Maryland and New York entered the dubious top 10 for first time, climbing all the way to fifth and sixth, respectively, from 15th and 14th. Missouri moved up, too, from 12th in 2007 to ninth last year, and Colorado went from 17th to 10th.

Application fraud remains the most prevalent type of misconduct.