A new study by LexisNexis on the prevalence of mortgage fraud and collusion shows a decline in the amount of fraud being reported, with the number of suspicious applications submitted to the Financial Crimes Enforcement Network (FinCEN) down 25 percent in 2012 compared with 2011.

Pending mortgage fraud cases have also decreased, declining from 2,691 cases in fiscal year 2011 to 1,954 cases in fiscal year 2012, according to FBI data, the report said. The numbers of criminal indictments saw less significant declines. The report cautions that distressed homeowner fraud has replaced loan origination fraud as the most visible threat to the mortgage industry.

According to Lexis Nexis, the higher a state ranks on a variety of indicators of distressed property, the more prevalent mortgage fraud is.

“This year’s study suggests that the more shared problematic economic indicators a state has, the greater its financial challenges will be in the coming years,” Tom Brown, senior vice president for financial services at LexisNexis, said in a statement.  “With Consumer Financial Protection Bureau (CFPB) mortgage regulations going into effect in January 2014, and demanding new rules for quality loans, it will be interesting to see what impact this has on overall mortgage defaults.” 

New Jersey was the only state in the study that made it on all three top 10 lists for mortgage fraud and misrepresentation, potential collusion among loan originators and property defaults. Florida, Georgia, Illinois, Nevada and Ohio also ranked high on the indicators for originator fraud and property defaults.