Loan application defects have declined for the sixth consecutive month.
The frequency of defects, fraudulence, and misrepresentation in information submitted in mortgage loan applications has decreased 5.5% in September compared with the previous month, according to recent data from the First American Loan Application Defect Index.
“Declining for the sixth consecutive month, the Loan Application Defect Index for purchase transactions fell 2.6% in September compared with August,” said Mark Fleming, chief economist at First American. “The defect index for refinance transactions also fell, declining 4.5% compared with the previous month.”
Fleming said that defect index has reached its lowest point in nearly three years.
“The overall defect index has not been this low since December 2016. In fact, the defect index for purchase transactions reached an impressive milestone – the lowest point since we began tracking defect risk for purchase transactions in January 2011.”
The combination of a strong economy, tight labor market, and low mortgage rates may have contributed to the decline in fraud risk, said Fleming.
“It’s no coincidence that the broader US economy has also hit some impressive milestones,” he said. “Rising household income driven by the strong labor market and lower mortgage rates have increased consumer house-buying power and helped boost consumer confidence. As consumer house-buying power and consumer confidence swell amid the strong labor market, the pressure to misrepresent income and employment in mortgage applications declines.”