The frequency of defects, fraudulence and misrepresentation in the information submitted in mortgage loan applications declined in March, according to the latest First American Loan Application Defect Index.
The index found that the frequency of defects, fraudulence and misrepresentation in the information submitted in mortgage loan applications decreased by 1.2 percent in March. In March, the year-over-year index increased by 3.8 percent.
Since the high point of risk in October 2013, loan defects in mortgage applications have declined 19.6 percent.
“A common adage about real estate is that it’s local. The dynamics of one housing market can be very different from another depending on the local economy and access to natural amenities, like mountains or water,” First American Chief Economist Mark Fleming said in a release. “The levels of loan application defect, fraud and misrepresentation risk vary greatly based on local conditions as well.”
“In fact, substantial differences exist among the 100 markets that we track with the Loan Application Defect Index. For example, the riskiest market this month, Little Rock, Ark., is almost twice as risky as the safest market, Rochester, N.Y.,” Fleming added.
According to the index, loan defect found in refinance transactions in March increased by 1.4 percent compared with February, and were 11.1 percent higher than a year ago. The Defect Index for purchase transactions in March decreased by 2.2 percent compared with February, and was up 2.3 percent compared with a year ago.
“All else equal, a market with fewer refinance transactions, greater numbers of second home and investment property transactions and more multi-unit and condo property transactions will be riskier,” Fleming said. “Nonetheless, measuring loan application defect, fraud and misrepresentation risk at the local level summarizes local differences into a single measure that can be consistently compared across markets.
First American said the five states with the greatest year-over-year increase in defect frequency in March were are Wyoming (+19.0 percent); Arkansas (+17.8 percent); Virginia (+15.5 percent); Maryland (+15.3 percent); and New Mexico (+14.7 percent).
The five states with the greatest year-over-year decrease in defect frequency in March were Louisiana (-11.8 percent); Minnesota (-8.4 percent); Connecticut (-6.9 percent); South Carolina (-6.8 percent); and New York (-3.8 percent).