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The level of loan defects fell by 1.3 percent last month, according to the latest First American Loan Application Defect Index. On a year-over-year basis, the level of loan defects in February registered a 5.1 percent.
Among the states, Utah saw the greatest year-over-year loan defect spike, with a 9.7 percent increase since February 2015. Other markets experiencing increased loan defects were Kentucky (8.8 percent), South Carolina (8.6 percent), the District of Columbia (eight percent) and Texas (five percent). The states with the greatest year-over-year decrease in defect frequency are: Alabama (-17.2 percent), Michigan (-16.2 percent), West Virginia (-15.6 percent), Minnesota (-14.8 percent) and Wyoming (-14.7 percent).
“The continued decline in loan application and mortgage defect risk is indicative of the benefits the industry is accruing from investments in technology and improved production standards,” said Mark Fleming, chief economist at First American. “The investments to improve compliance are producing real benefits in the form of higher quality loan manufacturing processes with fewer defects and less misrepresentation.”
The Loan Application Defect Index analyzes the frequency of defects, fraudulence and misrepresentation in the information submitted in mortgage loan applications.