The frequency of defects, fraudulence and misrepresentation in the information submitted in mortgage loan applications remained at the same from July into August, according to First American Financial Corp.’s latest Loan Application Defect Index report. On a year-over-year measurement, last month’s index was 20 percent higher than the August 2016 index.
The Defect Index for refinance transactions decreased 1.4 percent month-over-month in August, but was 18.6 percent higher than a year ago. The Defect Index for purchase transactions remained the same from July into August, but was up 15.2 percent compared to a year ago.
“Last month, we reported that for the first time in 2017 the Loan Application Defect Index didn’t rise, but we advised caution in interpreting the one-month trend,” said Mark Fleming, Chief Economist at First American. “In August, the overall risk of defects, fraud and misrepresentation again didn’t change. It’s a positive sign that loan application risk has remained stable for two consecutive months, but given the recent high-profile data breaches that exposed the personal credit information of many U.S. consumers, the risk of identity-based fraud and misrepresentation is certainly elevated.”