The frequency of defects, fraudulence and misrepresentation in mortgage application information was lower in March
The frequency of defects, fraudulence and misrepresentation in mortgage application information was lower in March.
The First American Loan Application Defect Index was down 1.2% month-over-month but up 3.8% year-over-year. It is now almost 20% since the high point of risk in October 2013.
For purchase transactions, the index was down 2.2% in March compared to February, but up 2.3% year-over-year.
Mark Fleming, First American’s chief economist, says that the defect risk varies from local housing market to local housing market.
“In fact, substantial differences exist among the 100 markets that we track with the Loan Application Defect Index. For example, the riskiest market this month, Little Rock, Ark., is almost twice as risky as the safest market, Rochester, NY,” he said.
He added that over the past three months, 6 markets have seen a rise of more 10% in defect, fraud and misrepresentation risk, while 3 markets have seen a decrease of more than 10%.
He added that transactions involving second homes or investment properties tend to carry elevated levels of defect risk as well.
“All else equal, a market with fewer refinance transactions, greater numbers of second home and investment property transactions and more multi-unit and condo property transactions will be riskier,” said Fleming. “Nonetheless, measuring loan application defect, fraud and misrepresentation risk at the local level summarizes local differences into a single measure that can be consistently compared across markets.”
The figures reveal a high concentration of markets with elevated defect risk in the Sun Belt states and a high concentration of markets with lower defect risk in the Rust Belt states.