The frequency of defects, fraudulence and misrepresentation in mortgage loan applications decreased in July, according to the First American Loan Application Defect Index.
The index decreased by 1.3 percent compared with the previous month. Year-over-year, the index decreased by 9.5 percent.
“Nationally, the Defect Index decline of 7.3 percent in July relative to three-month moving average was driven by declining risk in all but two markets – New Orleans and Louisville, Ky.,” First American Chief Economist Mark Fleming said in a release.
“In every other market, loan application, misrepresentation, defect and fraud risk declined,” Fleming added. “In some markets the decline was substantial. In 39 markets, defect risk declined more than 5 percent, while the three-month decline in risk exceeded 10 percent in 11 markets.”
According to the index, defects and misrepresentations in July were down 25.4 percent from the high point of risk in October 2013. Defects in refinance transactions in July were 2.8 percent lower than a year ago; defects in purchase transactions in July were down 13.2 percent compared with a year ago.
“The mortgage finance industry’s significant investment in financial technology to deliver a convenient, digital, highly automated and all-around better homebuying experience has also enhanced the mortgage manufacturing and underwriting process, producing declining levels of defect risk,” Fleming said. “The benefits of this investment are not geographically specific, so it’s no surprise that we see the impact of this investment in the vast majority of markets. The question is not where is defect risk declining, but when will it stop?”
Maine (+1.4 percent) and Hawaii (+1.1 percent) were the two states which had increases in defects in July, the index found.
The states with the greatest year-over-year decreases in defect frequency in July were South Carolina (-24.7 percent); Minnesota (-20.7 percent); Alabama (-20 percent); Vermont (-19.8 percent); and North Dakota (-18.6 percent).
The markets with the greatest year-over-year increases in defect frequency in July were Virginia Beach, Va. (+12.8 percent); Los Angeles (+10.8 percent); Orlando (+9.6 percent); San Diego (+4.9 percent); and Memphis, Tenn. (+2.6 percent).
The markets with the largest year-over-year decreases in defect frequency in July were Birmingham, Ala. (-27.3 percent); Raleigh, N.C. (-24.7 percent); Minneapolis (-23.3 percent); Boston (-19.5 percent); and Austin, Texas (-19 percent).