The frequency of defects, fraudulence and misrepresentation in mortgage loan applications in September increased by 1.3 percent compared with August, according to the First American Loan Application Defect Index.
Year-over year, the rate of mortgage loan application defects decreased 6 percent in September, and was down 23.5 percent from the high point of risk in October 2013, the index found.
“According to trend data in the Defect Index, we’re seeing this potential for mortgage fraud risk become a reality. Since the beginning of the year, the Defect Index has steadily decreased nationally, falling 8.4 percent from January through July 2018,” First American Chief Economist Mark Fleming said in a release accompanying the index. “However, the last two months have seen a reversal in this trend, with overall defect risk increasing 2.6 percent from August 1 through Sept. 30.
“In fact, September is the first month this year to experience an increase in the Defect Index for purchase transactions,” Fleming added. “While we have not yet seen the full impact of the hurricane season on defect risk trends, we already see preliminary defect risk spikes in states impacted by Hurricane Florence, North and South Carolina.”
During September, the five states with the greatest year-over-year increases in defect frequency were Hawaii (+9.7 percent); Maine (+8.6 percent); Alaska (+6.3 percent); Wyoming (+4.3 percent); and California (+3.9 percent), according to the index.
The five states with the greatest year-over-year decreases in defect frequency in September were Vermont (-19.4 percent); Minnesota (-18.6 percent); Arkansas (-17.0 percent); Alabama (-16.7 percent); and North Dakota (-15.7 percent), First American found.
The metropolitan statistical areas (MSAs) with the greatest year-over-year increases in defect frequency in September were San Diego (+11.7 percent); Los Angeles (+11.1 percent); Virginia Beach, Va. (+9.6 percent); Richmond, Va. (+7.2 percent); and Orlando, Fla. (+5.9 percent), the index found.
The MSAs with the largest year-over-year decreases in defect frequency in September were Minneapolis (-21.4 percent); Birmingham, Ala. (-21.2 percent); Raleigh, N.C. (-18.8 percent); St. Louis (-16.9 percent); and Salt Lake City (-14.9 percent).