Mortgage application fraud risk rose on a quarterly basis as the purchase share of total applications increased in the second quarter, real estate analytics firm Cotality reported Thursday.

The company’s National Mortgage Application Fraud Risk Index gained 11 points, or 9.1%, from the first quarter but was down 4.6% from the second quarter of 2025.

Fundamentally, said Matt Seguin, a senior principal covering mortgage fraud solutions for Cotality, surging mortgage rates since the Iran war started in late February may have set the preconditions for an uptick in fraud risk by driving the shift in product mix.

Purchase applications offer more opportunities to engage in fraud compared to refinances due to the larger quantity and variety of data requested by lenders.

“Some of the government refinance streamline programs may not require income or asset and appraisal docs, therefore the opportunity to commit fraud is lower,” said Seguin, describing the second-quarter data as “very interesting.”

Overall mortgage applications rose 5.2% in the second quarter, with the purchase share of applications spiking to 72% from 59% at the end of the first quarter, per Cotality data. Applications for government-backed loans increased slightly to almost one-quarter of applications.

Across that dataset, roughly 1 in 119 applications triggered a fraud risk alert. Investor applications triggered risk alerts at roughly three times the rate of typical borrowers, with 1 in 44 applications being flagged. Meanwhile, 1 in 27 multifamily applications triggered an alert, nearly four times the rate of typical applicants.

Cotality reported that investor and multifamily application volumes were essentially unchanged from the first quarter at 12% of total applications.

Similar to the first quarter, the only fraud risk category showing a year-over-year increase in the second quarter was for “undisclosed real estate,” which includes issues such as undisclosed debt, occupancy misrepresentation or past foreclosures. There were 2.6% more alerts in that category than a year ago.

“This increase appears to continue to be driven by the increase in investment property applications,” said the report. “Historically these alerts are 2.5 times more likely to fire on an investment property versus an owner-occupied property.”