For many years, mortgage fraud and cybersecurity were often viewed as separate risk categories. One focused on loan quality and borrower misrepresentation. The other focused on protecting systems, data, and technology infrastructure.

In recent years, those boundaries are becoming less distinct.

Criminals continue to use artificial intelligence (AI) to create convincing borrower documentation, build synthetic identities, and attempt to impersonate real borrowers. At the same time, cybercriminals continue to target lenders through more sophisticated phishing campaigns, credential theft, business email compromise schemes, ransomware attacks, and third-party software vulnerabilities.

As a result, the mortgage industry is increasingly evaluating fraud prevention and cybersecurity as complementary components of a broader risk management strategy.

The Mortgage Risk Environment Continues to Evolve

Mortgage application fraud risk remains a focus area across the industry. According to Cotality's National Mortgage Application Fraud Risk Index, an estimated 1 in 119 mortgage applications showed indications of fraud risk during the second quarter of 2026. The index increased from the prior quarter as purchase lending activity expanded and refinance activity remained constrained by higher interest rates. Purchase transactions accounted for approximately 72% of overall mortgage application volume during the quarter. ⁱ

Industry reporting also suggests elevated fraud risk within investment-property and multifamily lending segments. Cotality estimates that 1 in 44 investment-property applications and 1 in 27 multifamily applications showed indications of fraud risk during Q2 2026, compared with an overall industry average of 1 in 119 applications.ⁱ In addition, undisclosed real estate exposure continues to receive attention because it may conceal additional debt obligations, occupancy issues, or previous credit events that could affect risk assessments.

Loan quality reviews across the industry continue to identify concerns such as income and occupancy misrepresentation, undisclosed liabilities, and potentially fraudulent or manipulated borrower documentation. These trends reinforce the importance of comprehensive verification practices throughout the loan lifecycle.

While many of the underlying fraud schemes remain familiar, advances in technology, including AI, are enabling bad actors to execute these schemes with greater speed and sophistication.

Artificial Intelligence Is Changing Fraud Efficacy

Artificial intelligence is making it easier to generate documents that appear polished and convincing at first review.

Income documents, employment records, bank statements, and other supporting materials may look credible at first review yet still contain inaccurate or unsupported information. Bad actors can also combine publicly available information with compromised personal data to create more convincing synthetic identities. ⁱⁱ

Voice-cloning tools and deepfake technologies have introduced additional complexity. Traditional verification methods that once provided a high degree of confidence may no longer be sufficient on their own in every situation.

For lenders, one takeaway is that document appearance alone may not provide enough assurance. Independent verification through trusted sources and layered quality controls can help strengthen confidence in borrower information and transaction integrity.

Cyber Threats Continue to Create Mortgage Industry Risk

The mortgage industry remains an attractive target for cybercriminals because of the sensitive financial and personal information involved in mortgage transactions.

The FBI's Internet Crime Complaint Center reported 859,532 complaints of suspected internet crime in 2024, with reported losses exceeding $16 billion.ⁱⁱⁱ Reported losses increased by approximately 33% from the prior year, while phishing and spoofing remained among the leading categories of reported cybercrime activity.

Threats affecting mortgage organizations may include:

• Business email compromise schemes involving payment instructions or wire transfers.
• Credential theft targeting mortgage technology platforms.
• Ransomware attacks that disrupt operations.
• Malicious software delivered through fraudulent communications.
• Social engineering tactics designed to exploit trust and urgency.

Increasingly, cybersecurity incidents and mortgage fraud events share common characteristics. A compromised email account, stolen credentials, or exposed consumer data may provide the foundation for identity fraud, impersonation attempts, or payment diversion schemes.

This convergence is one reason many organizations are evaluating fraud prevention and cybersecurity efforts together rather than separate initiatives.

The Human Element Remains Important

Technology plays a significant role in helping organizations identify and manage risk, but employee awareness continues to be an important component of effective defense strategies.

The Cybersecurity and Infrastructure Security Agency (CISA) continues to promote several foundational security measures, including:

• Multifactor authentication
• Strong password practices
• Regular software updates
• Phishing awareness/training

These practices can help reduce exposure to common cyber threats affecting organizations across industries.

Within mortgage operations, fraud awareness and cybersecurity awareness often intersect. Loan officers, processors, underwriters, closers, and operational teams may help identify unusual activity, inconsistencies, or behaviors that warrant additional review.

Clear escalation procedures and a strong reporting culture can help ensure that potential concerns receive appropriate attention.

Areas of Focus for Mortgage Industry Leaders

As fraud and cybersecurity risks continue to evolve, many organizations are evaluating risk management through the broader lens of operational resilience.

Third-Party Risk Management

Mortgage lending frequently relies on technology providers, service organizations, data providers, and other external vendors.

While these relationships may provide efficiencies and operational benefits, they can also introduce additional risk. Organizations continue to evaluate vendor oversight programs, data-sharing practices, and incident response procedures to help strengthen resilience across interconnected systems.

AI Governance

AI presents opportunities to improve efficiency, automate processes, and support decision-making. However, emerging technologies can also introduce new governance considerations.

IBM's 2025 Cost of a Data Breach Report found that the average global cost of a single data breach reached $4.44 million, while the average cost in the United States reached $10.22 million. The report also highlighted concerns regarding the pace of AI adoption relative to security and governance controls.

As organizations continue to evaluate AI technologies, governance frameworks may help support responsible implementation and risk management.

Operational Readiness

Fraud response procedures, cybersecurity incident planning, employee training programs, and vendor-risk oversight can all contribute to organizational preparedness.

Organizations that periodically review and test these controls may be better positioned to respond when unexpected events occur.

Considerations for Building Operational Readiness

Organizations may help strengthen resilience through a combination of people, processes, and technology.

Considerations may include:

• Verifying information through trusted and independent sources.
• Applying layered identity validation throughout the loan process.
• Monitoring for material changes prior to closing.
• Supporting cybersecurity awareness and phishing education.
• Implementing multifactor authentication and access controls.
• Reviewing third-party risk management programs.
• Maintaining clear escalation procedures for suspicious activity.

Rather than relying on a single control, many organizations use multiple layers of protection designed to work together.

The Bottom Line

Mortgage fraud and cybersecurity are becoming increasingly interconnected.

A synthetic identity, a deepfake impersonation, a compromised credential, and a fraudulent wire instruction may appear to be different threats, but they can stem from similar challenges involving trust, verification, and information security.

As artificial intelligence, automation, and cyber threats continue to evolve, lenders that combine vetted technologies, disciplined verification practices, ongoing employee education, and effective governance may be better positioned to help protect borrower information, support loan quality, and strengthen operational resilience.

Today, fraud prevention and cybersecurity are no longer separate disciplines. Together, they can help support a broader approach to mortgage risk management throughout the loan lifecycle.

For additional insights into mortgage fraud and cybersecurity, register for our upcoming webinar, Staying Ahead of Mortgage Fraud Trends: Focus on Cyber Security, on October 15th at 1PM EST.

ⁱCotality, “Mortgage Fraud Risk Rises Due to High Mortgage Rates,” https://www.cotality.com/press-releases/mortgage-fraud-risk-rises-due-to-high-mortgage-rates

ⁱⁱCertified Credit, “Mortgage Fraud Trends in the Age of AI: What Lenders Need to Know in 2026,” https://www.certifiedcredit.com/mortgage-fraud-trends-in-the-age-of-ai-what-lenders-need-to-know-in-2026/.

ⁱⁱⁱFederal Bureau of Investigation, “FBI Releases Annual Internet Crime Report,” https://www.fbi.gov/news/press-releases/fbi-releases-annual-internet-crime-report

The content presented is intended to convey general information and is for informational purposes only and does not constitute legal, compliance, cybersecurity, accounting, or other professional advice or opinions. Industry statistics and trends are derived from publicly available third-party sources and are subject to change. Organizations should consult appropriate legal, compliance, risk management, and technology professionals regarding their specific circumstances.

© 2026 Radian Group Inc. All Rights Reserved. 550 East Swedesford Road, Suite 350, Wayne, PA 19087. Radian Group Inc. and its subsidiaries and affiliates make no express or implied warranty respecting the information presented and assume no responsibility for errors or omissions. This communication is provided for use by real estate or mortgage professionals only and is not intended for distribution to consumers or other third parties. This does not constitute an advertisement as defined by Section 1026.2(a)(2) of Regulation Z.