Interthinx: Mortgage Fraud Risk Climbs to Highest Level Since 2009

In the fourth quarter of last year, the risk of mortgage fraud elevated to the highest level since 2009, Interthinx reported Tuesday.

According to the company’s Mortgage Fraud Risk Report, the mortgage fraud risk index climbed to 159, representing a 16 percent increase from Q3 2012 and 9 percent increase from Q4 2011.

Interthinx pinpointed the source of the increase to a surge in property valuation fraud risk, which rose 25 percent from Q3. Property valuation fraud occurs when property values are manipulated to create equity. Interthinx explained investor activity in recovering metro areas creates rapid price changes and opportunities for value manipulation.

The other types of fraud the index tracks are identity, occupancy, and employment/income.

Reflecting the national trend, the number of “very high risk” metros spiked from 70 in Q3 to an unprecedented 125 this quarter, the report revealed.

Five states contributed at least five more high risk metros to the list. Ohio bumped up the Q4 figure by adding 8 metros, the most out of any other state, while California, Georgia, and Michigan added 6, and South Carolina added 5 metros.

In addition, 26 states have at least one newly added “very high risk” metro not seen on the Q3 list.

In Q4, the riskiest metros were located in Florida or California, with Lakeland-Winter Haven recording the highest value, 292. Other metros in the top five were Merced, California (288); Tampa-St. Petersburg-Clearwater (286); Yuba City, California (285); and Jacksonville (285).

Florida and Nevada remained as the top two riskiest states after posting respective index values of 246 and 239. The other states identified in the top five were New Jersey, Connecticut, and Ohio. Historically high-risk states Arizona and California took the No. 7 and No. 8 spots, respectively.

States where risk levels decreased by at least 20 points year-over-year were mainly located east, while states that saw significant declines were largely concentrated west.

“Clearly, this report illustrates the reality that the mortgage industry is driven by trends at the state and metropolitan levels and that the will to commit mortgage fraud is not abating – it is simply shifting strategy to meet opportunity,” said Jeff Moyer, president of Interthinx.

Interthinx says its indices are a proven leading indicator of default and foreclosure activity, so areas with high risk of fraud are likely to see high foreclosure rates. Looking ahead, Interthinx noted the states to watch closely are Florida, Nevada, California, Illinois and Ohio.

Firm Predicts Job Relocation Surge from Former Underwater Borrowers

Challenger, Gray & Christmas, Inc., a nationwide outplacement firm, is predicting a relocation surge in 2013 by job-seeking homeowners who are finally able to list their properties.

As home prices improve, more homeowners have been lifted out of negative equity, and thus more free to sell their properties and relocate. According to a recent report from Zillow, 1.9 million homeowners were freed from negative equity in all of 2012.

“One factor that has kept unemployment rates high has been the inability of underwater homeowners to relocate for employment opportunities. With home prices bouncing back, even those who may now simply break even on a home sale might consider moving to a region where jobs are more plentiful. This could spark a more rapid decline in the unemployment rate over the next year,” said John A. Challenger, the firm’s CEO.

According to a December report from the Bureau of Labor Statistics (BLS), 130 metropolitan areas had an unemployment rate that was 8 percent or higher and 47 metros registered rates 10 percent or higher. At the same time, 20 metro areas have a rate that sits below 4.5 percent, well below the national average of 7.9 percent as of January 2013.

“It is likely that employers in these low-unemployment regions are actually struggling to find available workers with the skills need to fill job openings,” Challenger said.

As for trends the firm is seeing, Challenger says relocation increased for job seekers going through the firm. In 2012, an average of 13.3 percent of those finding new positions each quarter relocated for the opportunity, up from 11.7 percent in 2011. In 2009 and 2010, the relocation rate was at about 10 percent.

The firm also noted states that are showing the biggest gains in home prices are also the same states dealing with higher unemployment. Arizona has seen home prices rise 20.1 percent over a one-year period, according to data from the Federal Housing Finance Agency (FHFA), and the state also hosts metros with high unemployment rates such as Flagstaff (8.4 percent), Lake Havasu City (9.5 percent), and Prescott (8.6 percent).

In California and Nevada, home prices rose 7.2 percent and 8.7 percent, respectively, over a year, according to FHFA data, while their unemployment rates are above the national average. BLS reported California’s unemployment rate was 9.7 percent in December, while Nevada had a rate of 9.8 percent.

Furthermore, data from Zillow showed Phoenix, Los Angeles, Riverside were among the top metros where the most homeowners were freed from negative equity in 2012.

2 Million Homeowners Freed From Negative Equity in 2012; 1 Million More to Come in 2013

Almost 2 million American homeowners were freed from negative equity in 2012, and the overall percentage of all homeowners with a mortgage in negative equity fell to 27.5 percent at the end of the fourth quarter, according to Zillow’s fourth quarter Negative Equity Report.

The falling negative equity rate is good news for struggling homeowners and is largely attributable to a 5.9 percent bump in home values nationwide last year to a median Zillow Home Value Index of $157,400 (when home values rise, negative equity falls). At the end of 2011, 31.1 percent of homeowners with a mortgage were underwater, or more than 15.7 million people.

In the fourth quarter, Zillow determined where American homeowners freed from negative equity in 2012 were located. Among the nation’s 30 largest metro areas, those with the highest number of homeowners freed from negative equity last year were Phoenix (135,099 homeowners freed in 2012); Los Angeles (72,936 homeowners freed in 2012); Miami-Fort Lauderdale (70,484 homeowners freed in 2012); Dallas-Fort Worth (59,461 homeowners freed in 2012); and Riverside, CA (58,417 homeowners freed in 2012).

Still, despite more than 1.9 million homeowners nationwide finding their way back above water last year, 13.8 million American homeowners are still struggling with negative equity. Many remain so far underwater that even the very high rates of appreciation experienced in many markets still can only bring them so far. In the Phoenix metro, for example, despite more than 135,000 freed homeowners last year, more than 300,000 homeowners — or 40.4 percent of homeowners with a mortgage — remain trapped in negative equity. This is largely attributable to the fact that although home values in Phoenix rose 22.5 percent last year, they remain more than 44 percent below their peak. So for those who bought at the peak, even with rapid appreciation, they still have a long way to go.

The graph below shows the loan-to-value (LTV) distribution for homeowners with a mortgage nationwide in 2012 Q4 vs. 2011 Q4. You can see that even though many homeowners are still underwater and haven’t crossed the bold 100 percent LTV line into positive equity, they are moving in the right direction. The 2012 Q4 buckets on the 100 percent+ LTV side (the red bars) are getting smaller compared to 2011 Q4, and the black bars are getting larger.

U.S. homeowners with a mortgage are slowly gaining equity back in their homes.

U.S. homeowners with a mortgage are slowly gaining equity back in their homes.

We also wanted to know how many more homeowners would be freed in 2013 and where they would be located. New this quarter, the Zillow Negative Equity Forecast predicts the negative equity rate among all homeowners with a mortgage will fall to at least 25.5 percent by the fourth quarter of 2013, freeing more than 999,000 additional homeowners nationwide. Of the 30 largest metro areas, the majority of these newly freed homeowners are anticipated to come from Los Angeles (72,696 homeowners freed in 2013); Riverside (62,407 homeowners freed in 2013); Phoenix (43,044 homeowners freed in 2013); Sacramento (33,356 homeowners freed in 2013); and Dallas-Fort Worth (31,434 homeowners freed in 2013).

Zillow forecasts negative equity by applying anticipated appreciation or depreciation rates to a home, according to the most current metro and national Zillow Home Value Forecasts, and by assuming all other factors remain constant.

“As home values continue to rise and more homeowners are pulled out of negative equity in 2013, the positive effects on the housing market will be numerous. Freed from negative equity, homeowners will have more flexibility, and some will likely choose to list their home for sale, helping to ease inventory constraints and moderating sometimes dramatic, demand-driven price increases in some markets,” said Zillow Chief Economist Dr. Stan Humphries. “But negative equity is still very high, and millions of homeowners have a very long way to go to get back above water, even with current robust levels of home value appreciation in most areas. As a result, negative equity will remain a major factor in the market for the foreseeable future.”

Also, new this quarter, users can zoom in on a portion of our Negative Equity visual and embed only that portion on their website. So, for example, if you were in Seattle and wanted to post the interactive tool to your site, we would be happy to show you how.

neg equity

Don’t Let These Tax Credits Go Down the Drain

Our friends at LearnVest offer sound financial tips and advice for every aspect of life. Check out this post on money-saving income tax credits. 

Want to pay less in taxes?

Unless you’re Warren Buffett, the answer is probably, “Yes!”

There are several ways to (legally) pay less in taxes. There are deductions, exemptions and — what we’ll talk about in this post — credits.

Unlike deductions and exemptions, which lower the amount of income you are taxed on, credits directly reduce the amount of taxes you owe. So if you receive a $1,000 credit, that means you will pay $1,000 less in taxes. Sweet and simple, right?

Read on to find out if you can claim any of the most commonly claimed credits.

If you have a low income  …

You could claim the Earned Income Credit. This credit, worth up to $5,891, applies to people whose earned income and Adjusted Gross Income fall below a certain threshold. Unlike most credits, the EIC is refundable. That means when the EIC you qualify for exceeds the amount of taxes you owe, you get a refund. Look at the chart below to see which category applies to you. If your income is less than the number listed, you may qualify.

EIC chart

If you plan to claim this credit, you will need all the information listed here, such as last year’s federal and state income tax statements, all your income statements for the current filing year and information on caretakers of any dependent children.

If you made energy-efficiency improvements to your home …

If you lowered your energy bills by sealing up your home, you get even more money from the IRS! The Nonbusiness Energy Property Credit is for homeowners who made energy-efficient improvements such as insulation, new windows and furnaces. For 2012, you can get a credit worth 10 percent of the cost of the qualified efficiency improvements you made. You can claim up to $500 over your lifetime.

What if your electricity comes from your own green sources? You should check out the Residential Energy Efficient Property Credit. This credit gives homeowners 30 percent of what they spend on qualifying property such as solar electric systems, solar water heaters, geothermal heat pumps, wind turbines and fuel cell property. No cap exists on the amount of credit, except for fuel cell property.

If in this coming year you decide you want to go green for your home, the IRS suggests that you check with the manufacture’s tax credit certification before you purchase. This can normally be found on the packaging or the company’s website. Full details are available on Form 5695.

Educate Yourself So You Don’t Become a Victim!

Educate Yourself So You Don’t Become a Victim!

For distressed homeowners in danger of losing their home, there are already a lot of problems. The last thing a homeowner in this situation needs is to fall victim to a scam. Unfortunately, people in this situation are often the most vulnerable to a kind of fraud called “mortgage relief fraud.”

Fraudsters will prey on people who are looking for a loan modification, short sale or other foreclosure alternative because these are the most common options for distressed homeowners.

There have been legal cases brought against many, but scammers always try to stay a step ahead of law enforcement. Even though many of them have been caught, there are still people who prey on vulnerable homeowners with too-good-to-be-true promises.

In fact, in a recent example highlighted in the New York Times, con artists told homeowners that they represented the bank and that the homeowners were already approved for a loan modification. Only after the homeowners paid thousands of dollars up front did the truth come to light.

I have a report that outlines the most common forms of mortgage relief fraud. Download it for free to educate yourself, then contact me for a free confidential consultation to ensure that you or someone you know doesn’t become the next victim!

Hit by a Disaster? You May Get Tax Relief

Wildfires in the West, flooding and landslides in Alaska and hard-hitting Superstorm Sandy were just a few of the major natural disasters that hit the United States last year. In all, 112 federal disaster declarations were issued in 2012.

For those living in an area where a federal disaster has been proclaimed, tax relief may be available.

Claiming losses

If you have been affected by a federally declared disaster, you have the option of claiming disaster-related casualty losses on your federal income tax return for either this year or last year. Claiming the loss on an original or amended return for last year will get you an earlier refund, but waiting to claim the loss on this year’s return could result in greater tax savings, depending on other income factors.

You may deduct disaster-related personal property losses that are not covered by insurance or other reimbursements; typically the IRS requires that the first $500 in losses be deducted from any claims. Disaster victims claiming their disaster loss on last year’s return are advised to write the Disaster Designation (i.e., “Superstorm Sandy” or “Noble Wildfire”) at the top of their tax forms so the IRS can expedite refund processing.

Deadline extensions

For some, the most welcome aspect of this tax relief will come in the form of extended tax filing and payment deadlines. The IRS has promised to abate any interest, late-payment or late-filing penalty that would otherwise apply. Affected taxpayers need not contact the IRS; this relief is automatically afforded to all taxpayers located in the disaster area.

Beyond the relief provided to taxpayers in FEMA-designated counties, the IRS works on a case-by-case basis with taxpayers who reside outside disaster areas but whose books, records or tax professionals are located in the areas affected a disaster — specifically Superstorm Sandy. Affected taxpayers from outside the covered disaster area must call the IRS disaster hotline at 1-866-562-5227 to request tax relief.

The IRS is waiving the usual fees for copies of previously filed tax returns for disaster-affected taxpayers. Taxpayers should write the assigned Disaster Designation in red ink at the top of Form 4506 (Request for Copy of Tax Return) or Form 4506-T (Request for Transcript of Tax Return) before submitting it to the IRS.

Additionally, workers assisting with relief and recovery activities in the covered disaster areas who are affiliated with a recognized government or philanthropic organization may be eligible for tax relief.

For additional information regarding disaster-related tax relief, visit the IRS website or consult a qualified tax professional.