Skip to main content

Florida and Texas Lead in Loan Defects

Aug 31, 2015
Rejected Loan App/Credit: chrisdorney

The Sunshine State and the Lone Star earned the new nicknames of the Loan Defect States, according to new data released by First American Financial Corporation.

According to First American, its Loan Application Defect Index rose 4.9 percent in July on a month-over-month basis, but fell 5.6 percent on a year-over-year measurement. The Index, which is designed to determine the estimated mortgage loan defect rates over time by geography and loan type, is far below its 17.5 percent peak in September 2013.

On the refi side, the Defect Index for refinance transactions was down 6.3 percent year-over-year but up 8.7 percent month-over-month and 7.1 percent over the last three months.

“After seeing improvement in the national mortgage loan defect trend last month, the index has returned to the trend of increasing risk that we have observed since the beginning of 2015,” said Mark Fleming, chief economist at First American. “What remains consistent from last month is the concentration of defect risk in the same handful of key markets in the south, particularly in Florida and Texas, as well as in the Northeast and upper Midwest. This month, major metropolitan areas in Florida and Texas continue to produce defect frequency levels well above the current national level.”

The five states with the highest month-over-month increase in defect frequency, according to First American, are Oklahoma (14 percent), Hawaii (13.1 percent), Louisiana (10 percent), Texas (10 percent) and Colorado (9.3 percent). The five local markets with the highest quarter-over-quarter increase in defect frequency are Oklahoma City (28.2 percent); Houston (25.6 percent); McAllen, Texas (25 percent); Austin, Texas (21.3 percent) and Louisville, Ky. (19.7 percent).

While Florida was not in the top five for either state or local markets, its Loan Application Defect Index for Florida is up four percent and has historically remained consistently higher than the national level of risk.

“While the condo market in Miami may have recovered dramatically, the stock of foreclosed properties remains high in many Florida markets,” said Fleming. “High levels of investor-owned condominium purchases in Miami and foreclosures throughout the state are all being reflected in the elevated defect risk that we are observing this year.”

About the author
Aug 31, 2015
Condo Prices, Sales Falling In Florida

New regulations and rising insurance costs hold back buyers in six major metros.

Feb 26, 2024
Rocket Companies Reports Decline in Fourth Quarter Revenue, Projects Optimism for Future Growth

Despite revenue dip, mortgage giant sees increase in market share and advances in AI technology.

Feb 22, 2024
Broker Action Coalition Unveils Inaugural Board Of Directors

Newly formed nonprofit organization BAC announces industry professionals to guide its mission of legislative change and educational initiatives in the mortgage industry.

Feb 21, 2024
GSEs Report Strong Earnings

Robust performance marks growth for both Fannie Mae and Freddie Mac, despite a dip in home purchases.

Feb 15, 2024
Friendly Competition Joins Forces

The merger aims to enhance local fulfillment and sales support, marking Guild’s sixth acquisition since 2021 and expanding its licensed originators to over 2,100 amidst a challenging market.

Feb 14, 2024
Guild Mortgage Announces Acquisition Of Competitor Academy Mortgage, Bolsters National Presence

The strategic move will see Guild Mortgage enhance its market share and become the 8th largest non-bank retail lender in the U.S., welcoming over 600 loan officers from Academy.

Feb 13, 2024