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Loan quality continues to gain strength, as witnessed in data released from the First American Loan Application Defect Index for June.
Last month, the First American Loan Application Defect Index decreased 1.4 percent from May and dropped by 12.2 percent as compared with June 2015. The Defect Index for refinance transactions in June fell by 3.2 percent month-over-month and is 15.5 percent lower than a year ago, while the Defect Index for purchase transactions dipped 1.2 percent month-over-month and tumbled by 11.1 percent compared to a year ago.
The greatest level of increased loan defect frequency among the states occurred in Maine (up 14 percent) and North Dakota (up 13.6 percent), while greatest decrease in defect frequency took place in Michigan (down 31.4 percent) and Florida (down 21.8 percent). Among the 50 major metro areas, the only market with year-over-year increase in defect frequency is was St. Louis (up 9.9 percent), while Detroit had the highest year-over-year decrease in defect frequency (down 35.9 percent).
“The Defect Index has fallen 5.3 percent over the last three months, and this trend shows no sign of abating,” said Mark Fleming, chief economist at First American. “The index has been reaching new lows this year, continuing its long-term trend. Since its inception, the Defect Index has been consistently trending lower, apart from the increases in risk in 2013 and early 2015.”