Investment and multifamily property loans have emerged as the most fraud-prone segments in the mortgage industry, according to recent data from Cotality. In the second quarter of 2025, the Cotality National Mortgage Application Fraud Risk Index noted sharp increases in the risk associated with these categories, even as overall fraud risk continued its steady climb nationally.
Cotality’s analysis reveals that the two-to-four-unit multifamily segment was particularly vulnerable, with approximately one in every 27 applications showing indicators of fraud. Remarkably, applications in this segment increased by 43% year-over-year. While the risk level within these multifamily loans dipped slightly—down 2% from a year ago—the volume of applications ensured this segment remained the highest risk in the industry. Investment property loans also continued to rank among the riskiest categories for mortgage fraud in the report.
Matt Seguin, senior principal of fraud solutions at Cotality, noted that these elevated risks are unfolding amid broader market volatility, including sustained high mortgage rates and fluctuating home values. “The increase in the fraud risk can partly be attributed to the volatility starting to be seen in the real estate market. Interest rate cuts haven’t come at the rate expected over the last year, so purchase transactions, which historically speaking have higher fraud risk, continue to represent almost 70% of the applications seen by Cotality,” Seguin said, according to Cotality.
Across categories, the report showed broad increases in categories such as undisclosed real estate debt, transaction fraud, property fraud, and income fraud—a landscape where multifamily and investment properties stand out as persistent flashpoints for potential fraud in the 2025 U.S. mortgage market.
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