New reports issued by the government and private analytical firms indicate a downward trend in incidents of mortgage fraud across the nation. While this bit of good news illustrates a positive shift in the housing market, analysts are still warning the public of potential fraud risks associated with the higher volume of mortgage applications, including an increased risk of identity-related mortgage fraud. According to the most recent CoreLogic report, the likelihood of fraud showing up in U.S. mortgage applications dropped 5.6 percent in second quarter of 2013 compared to the same period last year. That represents a potential $5.3 billion in bad loans. CoreLogic reviews mortgage applications for six types of potential fraud — employment, identity, income, occupancy, property, and undisclosed debt. The report also shows a year-over-year decline for five quarters since the index peaked in 2012. But not all the news is so optimistic. “As the housing market economy has healed over the last 18 months, a transition away from property-related to identity-related application fraud has occurred,” said Dr. Mark Fleming, CoreLogic Chief Economist. Corporate research firm LexisNexis shared similar findings in their 2013 fraud risk report, but further warned the public that lenders are still slogging through backlogs of loan modifications and short sales, which could have a major impact on future fraud risk estimates. The report also suggests that recent and upcoming regulations imposed by the Consumer Protection Finance Bureau may push the fraud numbers higher. The message seems clear: Despite positive trends in the housing market, analysts are warning both the public and the mortgage industry to remain vigilant in the fight against mortgage fraud. Michael Lewis is Managing Editor at the National Notary Association.