Loan Defects on the Rise – NMP Skip to main content

Loan Defects on the Rise

Jul 31, 2017
The frequency of defects, fraudulence and misrepresentation in the information submitted in mortgage applications increased by 7.4 percent from November 2018 to December 2018

The frequency of defects, fraudulence and misrepresentation in the information submitted in mortgage loan applications increased by 1.2 percent from May to June, according to the latest First American Loan Application Defect Index report. On a year-over-year basis, the Defect Index shot up by 16.7 percent last month.
 
The Defect Index for refinance transactions in June increased 2.9 percent month-over-month, and was 16.7 percent higher than a year ago. The Defect Index for purchase transactions was 1.1 percent higher when compared to May and 13.8 percent higher compared to a year ago.
 
The five states with the greatest year-over-year increase in defect frequency in June were South Dakota (66.7 percent), North Dakota (52.2 percent), Wyoming (46.3 percent), West Virginia (37.9 percent) and North Carolina (35.3 percent). No state recorded a year-over-year decrease in defect frequency. Among the major metro areas, the five markets with the greatest year-over-year increase in defect frequency last month were Raleigh, N.C. (49.2 percent), Charlotte, N.C. (26.8 percent), New Orleans (25.6 percent), Tampa (23.4 percent) and San Jose (23.3 percent). No major metro saw a year-over-year decrease in defect frequency.
 
“Following seven straight months of increases, the Loan Application Defect Index is now at the same level as almost two years ago in July 2015,” said Mark Fleming, Chief Economist at First American. “The market shift toward more purchase mortgages, coupled with rising rates and tight inventory, is generating the consistent upward trend in defect risk. Purchase transactions are inherently more at risk of defects, fraud and misrepresentation, and the pressures resulting from one of the strongest sellers’ markets in recent memory compounds the risk of an error on a loan application.”

 
About the author
Published
Jul 31, 2017
Strong Jobs Report Threatens Mortgage Rate Rally

October hiring more than doubled expectations, pushing Treasury yields higher

Nov 06, 2026
Fed Holds Rates, But Pricing Pressures Persist

Rising Treasury yields and fresh inflation data complicate rate locks, borrower qualification, and lender margins as markets anticipate another hike in December

Oct 29, 2026
Zippy Adds Capital For Manufactured-Home Lending Push

The $20 million investment from Saluda Grade will support expansion beyond 27 states and new loan products across wholesale, retail, and community channels

Oct 16, 2026
Inflation Hits 3.7%, Putting Mortgage Rate Relief At Risk

September’s inflation pickup puts recent rate improvements at risk, potentially eroding affordability gains from lower home prices and seller concessions

Oct 14, 2026
PLACE Acquires Ardley, Expanding Push To Turn Existing Borrowers Into New Loans

The latest deal connects borrower retention technology with Maxwell's origination platform and PLACE's real estate network, creating new opportunities for lenders

Oct 09, 2026
Equifax, TransUnion Launch New Tools To Cut Credit Report Costs

Both bureaus introduce ways to purchase credit scores separately from reports, while Equifax reports growing VantageScore adoption and extends $1 pricing through 2028

Oct 09, 2026