Loan Defect Level Remains Steady

Aug 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 misrepresented information submitted in mortgage applications remained the same in July as compared with June and was 20 percent lower than one year earlier, according to the Loan Defect Index from First American Financial Corp.

The Defect Index for refinance transactions increased 1.4 percent month-over-month and is 20.3 percent higher than a year ago, while the Defect Index for purchase transactions remained the same from June to July and is up 15.2 percent compared to a year ago.

“Finally, after seven consecutive months of increasing defect, fraud, and misrepresentation risk, no change compared to last month is welcome news,” said Mark Fleming, Chief Economist at First American. “In particular, purchase transactions, which are inherently more at risk of defects, fraud and misrepresentation, showed no increase compared to a month ago. One month doesn’t establish a trend, so it will be important to see if we’ve reached a turning point in the long-run trend of increasing defect risk.”

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Phil Hall

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Aug 31, 2017

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