Cotality reports 8.2% rise in mortgage fraud risk during Q3

"The index, which measures quarterly trends in mortgage application fraud across the industry, is based on data from Cotality's LoanSafe Fraud Manager, which uses predictive scoring technology to assess risk. It tracks six types of fraud indicators: identity, income, occupancy, property, transaction and undisclosed real estate debt. Out of the six areas Cotality evaluates, it only found a rise in one of the categories: undisclosed real estate fraud."

"That type of fraud, which includes hiding debts, misrepresenting occupancy or concealing derogatory credit events from lenders, climbed 9.1% from a year earlier. Undisclosed real estate was once again the fraud segment with the highest increase. As the percentage of investors grows, more borrowers have multiple properties and mortgages. Oftentimes, those mortgages are being refinanced simultaneously, and they may be with different lenders. This could be why we're seeing a continuing uptick in undisclosed real estate debt, said Matt Seguin, senior principal, Cotality Fraud Solutions."

Cotality's LoanSafe Fraud Manager underlies the index and uses predictive scoring to assess mortgage application fraud risk. The index tracks identity, income, occupancy, property, transaction and undisclosed real estate debt. Only undisclosed real estate fraud rose year over year, climbing 9.1% and remaining the segment with the largest increase. A growing investor share has led to more borrowers with multiple properties and simultaneous refinances across different lenders, which may drive undisclosed debt concealment. Overall mortgage applications rose 8% from Q2 to Q3 2025; purchase applications were 67% and government-backed loans 25% of volume. Property-value warnings rose 42% quarter over quarter and 400% year over year, and alerts for inflated income, identity theft attempts and misrepresented owner-occupancy also increased. Investment and multifamily loans showed elevated risk, with fraud in one of every 45 investment applications and one of every 26 multifamily applications.

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