August 31, 2017, Santa Ana, Calif.
First American Financial Corporation (NYSE: FAF), a leading global provider of title insurance, settlement services and risk solutions for real estate transactions, today released the First American Loan Application Defect Index for July 2017, which estimates the frequency of defects, fraudulence and misrepresentation in the information submitted in mortgage loan applications. The Defect Index reflects estimated mortgage loan defect rates over time, by geography and by loan type. It’s available as an interactive tool that can be tailored to showcase trends by category, including amortization type, lien position, loan purpose, property and transaction types, as well as state and market comparisons of mortgage loan defect levels.
The frequency of defects, fraudulence and misrepresentation in the information submitted in mortgage loan applications remained the same in July 2017 as compared with the previous month.
Compared to July 2016, the Defect Index increased by 20.0 percent.
The Defect Index for refinance transactions increased 1.4 percent month-over-month, and is 20.3 percent higher than a year ago.
Will The Fed’s Actions in September Increase Loan Defect Risk?
“In September, the Federal Open Market Committee (FOMC) may act again to push interest rates higher,” said Fleming. “Historically, when mortgage rates increase, more borrowers consider adjustable-rate mortgages with lower rates instead of more traditional fixed-rate mortgages to maintain purchasing power.
The five states with the greatest year-over-year increase in defect frequency are: South Dakota (+68.5 percent), North Dakota (+54.5 percent), Wyoming (+50.8 percent), North Carolina (+39.4 percent), and Iowa (+33.9 percent).
Among the largest 50 Core Based Statistical Areas (CBSAs), the five markets with the greatest year-over-year increase in defect frequency are: Raleigh, N.C. (+54.0 percent); New Orleans (+34.7 percent); Charlotte, N.C. (+28.6 percent); Buffalo, N.Y. (+27.6 percent); and Tampa, Fla. (+25.3 percent).
There is one CBSA among the largest 50 CBSAs with a year-over-year decrease in defect frequency: Houston (-1.1 percent).
The next release of the First American Loan Application Defect Index will be posted the week of September 25, 2017.