The frequency of defects, fraudulence and misrepresentation in the information submitted in mortgage applications in rose by 3.9 percent on both a year-over-year and month-by-month measurement, according to the latest data from First American Financial Corp.’s Loan Application Defect Index.
Within the application categories, the Defect Index for refinance transactions increased 3.3 percent from February to March, but was 4.5 percent lower than a year ago. The Defect Index for purchase transactions increased 2.4 percent on a month-by-month basis and was up 3.6 percent compared to a year ago. Wyoming had the greatest year-over-year increase in defect frequency with a 42.4 percent spike, while Connecticut recorded the greatest year-over-year decrease in defect frequency with an 8.9 percent drop.
“This month, the Loan Application Defect Index continued to trend upward as the risk on refinance and purchase transactions both increased compared to a month ago,” said Mark Fleming, chief economist at First American. “After four consecutive months of increased defect risk, it’s fair to call this a trend. We are experiencing one of the strongest sellers’ markets in recent memory and the ‘speed-buying’ that is required for home buyers to make an offer and win a bid for homes they like may be contributing to the increase in defect, misrepresentation and fraud risk that we are observing.”