The level of prosecutorial activity on mortgage fraud cases fell to the lowest level since the financial crisis erupted. Despite diminishing activity, two states saw a surge.

Mortgage Daily's Third Quarter 2013 Mortgage Fraud Index was 655. The index reflects motions and decisions tracked byMortgage Daily on cases where a lender was deceived into making a credit decision. Both the number of cases and the dollar amount were factored into the index.

The last time the index was this low was in Q4 2007.

There is roughly a three to five year lag between when the fraud occurred and prosecution. The recent improvement reflects better quality control by lenders and the increased use of fraud prevention services.

"As mortgage bankers have been hit with a tidal wave of repurchase demands on agency mortgages, they have taken steps to reduce risk on new originations," Mortgage Daily Founder and Publisher Sam Garcia said.

Estimated loan amounts associated with cases tracked totaled $1.1 billion in the most recent period -- the lowest since Q4 2010.

The number of cases tracked fell to 91.  

"Based on preliminary fourth-quarter data, the Mortgage Fraud Index could fall another 12% in the next report," Mr. Garcia projected. "In addition to an improving trend, the government shutdown slowed prosecution activity."

California had the highest Q3 index, while Nevada's index was up for the fourth consecutive quarter.

Based on aggregate loan amounts involved, North Carolina was the worst thanks to the Wax House case and a case involving a manufactured housing retailer.

Full Third-Quarter 2013 Mortgage Fraud Index report:
http://www.MortgageDaily.com/FraudIndex121613.asp?spcode=pr

Mortgage Fraud News:
http://www.mortgagedaily.com/MortgageFraud.asp?spcode=pr