Mortgage fraud continues to be among the major factors driving Detroit pre foreclosures. The Detroit-Flint-Ann Arbor metro area was ranked fourth among all U.S. metro areas in cases of mortgage application misrepresentation and appraisal fraud last year.

Statewide, cases of mortgage fraud were still spreading, putting Michigan fifth in the nationwide mortgage fraud list compiled by Mortgage Asset Research Institute last year. Although still high on the fraud charts, the fifth ranking was an improvement from the fourth ranking of Michigan in 2008.

The top four states in the fraud list were Florida, New York, California and Arizona. Except New York, the top states also occupy charts of states with the largest lists of properties for sale.

Fraud analysts said that the diverse types of mortgage fraud being carried out in Detroit have been contributing substantially to the still high ranking of Michigan in the nationwide fraud list. The other states in the top-ten list were Maryland, New Jersey, Georgia, Illinois and Virginia.

For Michigan, the only positive thing about the fraud report was the continued slide of the state down the fraud chart. The state ranked second in a certain year before 2008.

High rates of mortgage fraud are expected to drive more Detroit pre foreclosures as homes bought by borrowers through fraudulent means have higher risks of getting abandoned when the fraud is uncovered or when borrowers can no longer afford to make the monthly payments.

The most common type of mortgage fraud nationwide last year was home loan application misrepresentation, which accounted for 59 percent of all recorded fraud cases in 2009. It has been the top type of fraud since 2005.

The second most common fraud type was valuation misrepresentation, which accounted for 33 percent of all cases. This type surged by 11 percent from 2008. The other most common documented fraud types were verification of deposit, verification of employment, credit reports and closing or escrow costs.

While Michigan was fifth in the mortgage fraud chart in 2009, the state was eighth in the foreclosure rate chart during the same year. A total of 118,302 homes defaulted, got repossessed or entered public foreclosure auctions in Michigan

In the first quarter this year, Detroit pre foreclosures accounted for a huge part of the 27,128 pre foreclosures posted in Michigan during the quarter, as Detroit also contributed significantly to the high ranking of Michigan in the mortgage fraud charts.

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