Skip to main content

Loan Defects Up 15.9 Percent From Last Year

Phil Hall
Apr 30, 2019
Photo credit: Getty Images

The frequency of defects, fraudulence and misrepresentation in the information submitted in mortgage loan applications remained unchanged from February to March, according to the latest data from the First American Loan Application Defect Index. However, the Defect Index increased by 15.9 percent from one year earlier.
The Defect Index for refinance transactions was also unchanged from month-to-month, but was up 22.9 percent compared with a year ago. The Defect Index for purchase transactions increased inched up by one percent compared from February and soared by 12.4 percent compared with a year ago.
“Nationally, defect risk continued to surge in early 2019 and in February reached its highest point since 2013,” said Mark Fleming, Chief Economist at First American. “Suddenly in March, the acceleration stopped. Two recent trends influenced defect risk in opposite directions and drove the moderation in defect risk. In 2018, mortgage rates steadily increased, reaching a high of 4.9 percent in November, before reversing course in December. Mortgage rates have been declining ever since, reaching 4.27 percent in March, 0.17 percentage points lower than one year ago. As mortgage rates fall, the incentive to refinance increases. In the first quarter of 2019, the share of refinance mortgage transactions increased to 32 percent of the overall mortgage market, a five percent increase over the prior quarter. While loan application defects can happen on either purchase or refinance transactions, there is a lower propensity for fraud and misrepresentation with refinance transactions. So, as the share of lower-risk refinance transactions increases, overall fraud risk tends to decline.”

Apr 30, 2019
Biden Nominates McCargo To Lead Ginnie Mae

Currently Serves As Senior Advisor For Housing Finance At HUD

Regulation and Compliance
Sep 14, 2021
OCC Plans To Rescind 2020 CRA Rule

The OCC formally issued a proposal to rescind a controversial rule within the Community Reinvestment Act (CRA) that was published in June 2020.

Regulation and Compliance
Sep 10, 2021
Flexibilities Move Forward

Pandemic Priorities Continue To Drive Industry Modernization

Regulation and Compliance
Sep 08, 2021
FHFA And The Enterprises Coordinate Action On Equitable Housing

Today the FHFA is announcing that Fannie Mae and Freddie Mac (the Enterprises) will submit Equitable Housing Finance Plans to the FHFA by the end of 2021.

Regulation and Compliance
Sep 08, 2021
Realtors Encouraged By Biden Plan to Expand Housing Supply

Administration Said Wednesday It Plans To Add 100,000 Affordable Homes In 3 Years

Regulation and Compliance
Sep 03, 2021
Biden Administration Announces Plan For Affordable Housing

President Biden and his administration firmly believe it is time to intervene in the housing market.

Regulation and Compliance
Sep 01, 2021