Mortgage applications with defects, fraud or misinformation increased 5.8 percent in January, according to First American Financial Corp.
While the First American Loan Application Defect Index for January 2017 found an increase in problem mortgage applications compared with December 2016, the Defect Index decreased 3.9 percent year-over-year, and is 28.4 percent below the index’s high point in October 2013.
First American Chief Economist Mark Fleming attributed January’s increase to a declining percentage of refinances.
“The overall index increase is largely the result of waning refinance activity in the mortgage market,” Fleming said in a press release. “Defect, misrepresentation and fraud risk is significantly lower on refinance transactions, so the increased risk of misrepresentation and fraud is due to the increasing share of higher risk purchase transactions within the mortgage market.”
“As the mortgage market composition continues to shift toward purchase transactions in 2017, the risk of defect, fraud and misrepresentation will also increase,” Fleming said.
The index identified Wyoming (+32.2 percent), North Dakota (+29.0 percent), Montana (+27.3 percent), Mississippi (+25.4 percent) and Louisiana (+20.3 percent) as the states with the highest increase in mortgage applications with defects, fraud or misrepresentation.