The frequency of defects, fraudulence and misrepresentation in the information submitted in mortgage applications in January remained the same as December, according to the First American Loan Application Defect Index.
However, the frequency of defects, fraudulence and misrepresentation in the information submitted in mortgage applications in January increased by 13.7 percent compared with January 2017. The frequency of defects, fraudulence and misrepresentation in refinance applications in January was 16.9 percent higher than a year ago.
“The overall defect, fraud and misrepresentation risk index remained unchanged, however, the index for purchase transactions increased in January,” First American Chief Economist Mark Fleming said in a release. “While misrepresentation and manufacturing defects can happen on either purchase or refinance transactions, there is a greater propensity for fraud with purchase transactions. The uptick in defect frequency in purchase transactions in January is an indication of heightened fraud risk.”
According to the index, the five states with the greatest year-over-year increase in defect frequency in January were South Dakota (+39.7 percent); New Mexico (+29.9 percent); Wyoming (+24.4 percent); Oregon (+23.9 percent); and Ohio (+23.1 percent). The two states with a year-over-year decrease in defect frequency in January were Connecticut (-4.3 percent); and Louisiana (-3.4 percent).
The metropolitan areas with the greatest year-over-year increases in defect frequency in January were Oklahoma City (+29.6 percent); Virginia Beach (+26.9 percent); Miami (+25.3 percent); Orlando, Fla. (+24.7 percent); and Cleveland (+23.9 percent).
The three metropolitan areas with a year-over-year decreases in defect frequency in January were Hartford, Conn. (-3.1 percent); Minneapolis (-2.6 percent); and Raleigh, N.C. (-2.5 percent).
“As the risk of fraudulent purchase transactions rises, understanding where risk lies is important,” Fleming said. “Florida is one of the largest markets in the country with concentrations of condominiums in the large coastal markets. The combination of size and rising defect, fraud and misrepresentation risk in condominiums, makes Florida an important market to watch.”