During November, the Defect Index for refinance transactions remained unchanged compared with October, but it was up 23.2 percent higher from November 2016. The Defect Index for purchase transactions increased 1.1 percent month-over-month and rose by 13.8 percent year-over-year.
Mark Fleming, Chief Economist at First American, did not view the year-over-year increases with alarm.
“Keep in mind that the Loan Application Defect Index was at its lowest point ever in November 2016, before defect risk surged by 24 percent in the following seven months, one of the fastest changes the defect index has recorded since its inception in 2011,” Fleming said. “The increase was primarily driven by an increase in the share of purchase mortgage transactions, which tend to carry more risk, and more transactions in riskier markets. This fall, we have seen some moderation and stabilization of these market dynamics and, as a result, no further increase.”