Lesley Mitchell

A company that monitors mortgage fraud activity nationwide has ranked the Salt Lake City metropolitan area as the worst in the country for potentially fraudulent home loans in default.

Salt Lake City ranks No. 1 on the Mortgage Asset Research Institute's list of metropolitan areas with the highest rate of early payment defaults, which involve loans that are delinquent more than three months in the first year in which they are made. While not all such loans are fraudulent, as many as half or more of them are, said Jim Croft of the Reston, Va.-based institute.

He said in some cases of fraud, borrowers lie on loan applications. In other cases, those involved in the home-buying process do unethical or illegal things to help home-buyers qualify for homes. An appraiser, for example, may provide and inflated appraised value of property or a loan officer may inflate applicant's income on load applications. Even worse, as the Utah Attorney General's Office reported Wednesday, some mortgage brokers sell home buyers an illegally obtained Social Security number which the buyer then uses to obtain a loan to buy a house--at times for too high a price--from the mortgage broker.

The Mortgage Asset Research Institute ranks metropolitan areas based on their share of early payment defaults in relation to the total number of loans originated in the area in a particular year.

Salt Lake City moved to No. 1 in 2003 from No. 6 in 2002. It also was No.1 in 2001 up from No.3 in 2000.

The institute also ranks states by their share of early payment defaults in relation to originations of subprime loans, which are home loans made to people with less than good credit or other issues which prevent them from qualifying for the best loan terms. Based on 2003 data, Utah ranks No. 1 in early payment defaults on subprime loans, followed by Oklahoma and Colorado, tied for No.2, and New York and Mississippi. Overall the institute ranks Utah the fifth worst state in the country for overall mortgage fraud on a per capita basis.