Defect Index Declines for Purchase Loans
The frequency of defects, fraudulence and misrepresentation in the information submitted in mortgage loan applications during May decreased by 2.4 percent compared with April, according to the latest Loan Application Defect Index data from First American Financial Corp. Compared to May 2017, the Defect Index is down by 3.6 percent.
The Defect Index for purchase transactions decreased by 4.6 percent compared with the previous month and is 7.8 percent lower than the level from one year ago. The Defect Index for refinance transactions was unchanged month-over-month and is 4.4 percent higher year-over-year.
“The most important news in this month’s Loan Application Defect Index is that the Defect Index for purchase transactions decreased by 4.6 percent compared with the previous month, is down 7.8 percent compared with a year ago, and has declined almost 10 percent in just the past five months,” said Mark Fleming, Chief Economist at First American. “There’s no better time to have loan application misrepresentation, defect and fraud risk on purchase transactions on the decline than when the market share of purchase transactions is rising. It’s likely that all of the investment in more digitized, automated, and efficient mortgage manufacturing and underwriting technology that’s been made in recent years is beginning to pay off. Now the question is, how much lower will it go?”