SANTA ANA, Calif.–A tool that measures defects in mortgage applications is reporting that for the seventh consecutive month it has seen an increase in defects, fraud, and misrepresentation in the information on mortgage apps.
According to the First America Loan Application Defect Index, defects discovered in mortgage apps increased 1.2% from May to June, which is up 16% from June 2016. Nevertheless, the most recent rate of defects is still down 17% from its peak in October of 2013, the company said.
The top five markets in which defects have grown the most quickly are all in the South and include Raleigh and Charlotte in North Carolina, and New Orleans.
Among the findings in the latest First American Loan Application Defect Index, which is for June 2017:
- The frequency of defects, fraudulence and misrepresentation in the information submitted in mortgage loan applications increased 1.2% in June 2017 as compared with the previous month
- Compared to June 2016, the Defect Index increased by 16.7%
- The Defect Index is down 17.6% from the high point of risk in October 2013
- The Defect Index for refinance transactions increased 2.9% month-over-month, and is 16.7% higher than a year ago
- The Defect Index for purchase transactions increased 1.1% compared to last month, and is up 13.8% compared to a year ago.
According to the company, the First American Loan Application Defect Index estimates the level of defects detected in the information submitted in mortgage loan applications processed by the First American FraudGuard system. The index is based on the frequency with which defect indicators are identified. The Defect Index moves higher as greater numbers of defect indicators are identified. An increase in the index indicates a rising level of loan application defects. The index, nationally and in all markets, is benchmarked to a value of 100 in January 2011. Therefore, all index values can be interpreted as the percentage change in defect frequency relative to the defect frequency identified nationally in January 2011.