A recent report, published by Interthinx, an anti-fraud vendor for the financial services industry, revealed that loans associated with multi-unit properties have a much higher fraud risk than loans associated with other property types. Mortgage fraud occurs when an individual makes a material misstatement, misrepresentation, or omission which is relied upon by an underwriter or lender to fund, purchase, or insure a loan.

According to Interthinx, the fraud risk for multi-unit properties is more than double the risk associated with single-family residences, condos, or planned unit developments. The report should prompt lenders to screen these kinds of mortgage loan applications with increased diligence.

Multi-unit property loans tend to carry with them a higher propensity for occupancy and employment/income fraud. To keep financial risks low, lenders and servicers must constantly be on the lookout for fraudulent applications. There are many technological tools on the market to detect fraud. The best line of defense, however, is often a strict lending policy and thorough screening of loan documentation.