The frequency of defects, fraud and misrepresentation in mortgage applications in April decreased by 4.2 percent compared with the previous month, according to the latest First American Loan Application Defect Index.
First American said April’s month-month decrease in loan defects was the first since July 2018.
“Decreasing mortgage rates contributed to an increase in inventory, reducing the competitive pressure on the housing market, as well as contributing to an increase in lower-risk refinance transactions,” First American Chief Economist Mark Fleming said in a release.
According to the index, loan defects increased by 11 percent compared with April 2018, but were down 10.8 percent from the high point of risk in October 2013.
The index for refinance transactions in April decreased by 3.5 percent compared with the previous month, and was up 16.9 percent compared with a year ago. The index for purchase transactions decreased by 4 percent compared with the previous month, and was up 10.3 percent compared with a year ago.
“The two competing trends that resulted in a flat fraud risk last month were the increasing share of less risky refinance transactions working to decrease overall fraud risk, and the continuation of the hot sellers’ market, motivating buyers to misrepresent information in order to qualify for a bigger mortgage and increase overall fraud risk,” Fleming said.
The five states with year-over-year increases in defect frequency in April were New York (+37.3 percent); Nebraska (+37 percent); Iowa (+35 percent); Hawaii (+33.7 percent); and West Virginia (+31.1 percent). The two states with the year-over-year decreases in defect frequency in April were Arkansas (-4.8 percent); and Florida (-1.1 percent).