The latest National Mortgage Application Fraud Risk Index for Q1 of 2026 has been published by Cotality. The probability of mortgage fraud dropped by 9% from the previous quarter (Q4 2025) and 9.3% from the previous year. Given that refinances rose to 41% in Q1 2026, this represents a return to historical averages. One out of every 129 mortgage applications had signs of fraud.
The Undisclosed Real Estate category saw the most year-over-year rise in Q1 2026, at 7.7%. Additionally, unreported debt, potential occupancy misrepresentation, and/or unfavorable credit events (foreclosure, notice of default, short sale, etc.) may be concealed from the lender as a result of undisclosed real estate. More applications for investment properties seem to be the cause of this surge. In the past, the likelihood of these alerts going off on an investment property is an estimated 2.5 times higher than that of an owner-occupied property. For Q1 2026, every other fraud risk category showed a year-over-year decline.
After analyzing the most predictive warnings, Cotality analysts found rising trends in income and property from January to March and multiple areas of occupancy risk:
- Income: An increase in alarms about a borrower’s high income in relation to their age.
- Property: Jumps in alerts about the subject property’s potential flipping (previous sale within the last 12 months) and the seller’s status as an LLC or corporate organization.
- Occupancy: More notifications that a primary or secondary residence won’t be inhabited as stated. This involves reporting the subject as a primary refinance with a different tax mailing address or claiming the subject as a second home if it is within 25 miles of their present residence.
Nonetheless, Cotality’s research consistently reveals that the investment and multi-family categories are the two most risky. In contrast to the industry’s average estimate of 1 in 129, Cotality’s data projection for Q1 2026 indicates that 1 in 44 investment applications and 1 in 29 multi-family applications exhibit indications of fraud risk.
“We saw that surge of investor volume from last year plateau and begin to decrease in Q1 2026 as an overall portion of the applications. In Q4 2025 investment and multi-unit represented 13.4% of applications but that dropped to 12% in Q1 2026, roughly an 11% decrease,” said Matt Seguin, Senior Principal of Cotality Mortgage Fraud Solutions. “Lenders should remain diligent on fraud reviews, especially around investor and multi-unit homes as the underlying data does continue to show some risk there even with an overall decreasing fraud index. It’s also worth noting, that while all fraud risk categories declined year-over-year, except undisclosed real estate, we do see property (inflated value) and transaction fraud risk both have risen quarter-over-quarter, 1.4% and 7.1% respectively.”
The top five riskiest states for indications of fraud were:
- New York (up less than 1% in the last quarter)
- Florida (up over 3%)
- Connecticut (up 6%)
- New Jersey (down 6%)
- California (down over 8%)
Overall applications for Cotality increased by 6.7% between Q4 2025 and Q1 2026. In contrast to the industry’s average estimate of 1 in 129, Cotality’s data projection for Q1 2026 indicates that 1 in 44 investment applications and 1 in 29 multi-family applications exhibit indications of fraud risk.
Cotality’s Q2 2026 Mortgage Fraud Report will be released in August 2026.
