The most recent National Mortgage Application Fraud Risk Index for Q3 of 2025 has been published by Cotality. Although mortgage fraud risk decreased by 2.7% from the prior quarter, it rose by 8.2% year over year. There are signs of fraud in an estimated 1 in 118 mortgage applications.
Cotality looked at six aspects of mortgage fraud and discovered that only one—undisclosed real estate fraud—had increased. The year-over-year increase in this type of fraud was 9.1%. Unreported debt, potential occupancy misrepresentation, and/or negative credit events (foreclosure, NOD, short sale, etc.) that are concealed from the lender are examples of unreported real estate fraud. The rise in investors and more people being compelled to rent due to high home prices and mortgage rates may be the reason for the surge in concealed real estate fraud.
Key Findings:
- Mortgage fraud risk increased 8.2% year-over-year, with an estimated 1 in 118 applications showing indications of fraud.
- Undisclosed real estate fraud significantly increased year-over-year, as more investors juggle multiple mortgages with multiple lenders.
- Risk alerts for decreasing home prices across most of the U.S. increased by 400% year-over-year.
“Undisclosed real estate was once again the fraud segment with the highest increase,” said Matt Seguin, Senior Principal of Cotality Fraud Solutions. “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.”
Between Q2 and Q3 of 2025, the total number of mortgage applications rose by 8%. Although it has dropped to 67% of transactions, the percentage of applications for purchases is still significant. The percentage of all applications that are supported by the government has stayed constant at 25%.
Alerts to Cotality’s warning system concerning declining property values have increased significantly, rising 42% in the most recent quarter and 400% over the previous year. As inventory rises, Cotality’s Home Price Index reveals that prices are down throughout much of the U.S.
Cotality also found increasing risk trends in Q3 in several other areas: income, identity, and occupancy.
- Income: An increase in alerts related to high income compared to the value of the property being purchased. This could be an indicator of inflated income or misrepresentation of occupancy.
- Identity: Increased alerts about attempted identity theft including using a deceased borrower’s social security number or other names associated with a social security number.
- Occupancy: Increased alerts that a primary or a second home will not be occupied as disclosed. This includes claiming owner-occupied properties when there has been a rental listing found on the property or a primary residence that has a different tax mailing address.
Note: Cotality’s data continues to show that the two highest-risk categories are in the investment and multifamily spaces. Cotality’s data estimate for Q3 2025 shows 1 in 45 investment applications and 1 in 26 multi-family applications have indications of fraud risk compared to an overall average estimate of 1 in 118 for the industry as a whole.
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