For the fifth consecutive month, the percentage of loan applications with defects, fraud and misrepresentation increased during April, according to First American Financial Corp. (FAF).
FAF’s Loan Application Defect Index found the frequency of defects, fraud and misrepresentation in mortgage loan applications increased 2.5 percent in April 2017 as compared with the previous month, and jumped 8 percent from one year ago.
Defects in refinances increased 4.8 percent month-over-month, and increased 3.1 percent year-over-year. The index for purchase transactions increased 2.3 percent compared with last month, and rose 7.2 percent compared with a year ago.
“The Loan Application Defect Index continued its strong upward increase for the fifth consecutive month,” FAF Chief Economist Mark Fleming said in a release. “The pace of defect risk growth is as strong as we have seen since the index began in 2011, adding to the concern over the five-month trend.”
“While we have recently noted that part of the rise in overall risk is due to the market’s shift toward riskier purchase transactions, the fact that risk in refinance transactions is also on the rise underscores the need for caution,” Fleming added.
According to the index, the states with the greatest year-over-year increase in defects during April were South Dakota (+49.1 percent); Wyoming (+43.5 percent); North Dakota (+39.1 percent); West Virginia (+35.1 percent); and Iowa (+29.5 percent). Only two states (Connecticut and Oklahoma) had year-over-year decreases in loan defects.
The metropolitan areas with the largest year-over-year increases in loan defects during April were Raleigh, N.C. (+32.8 percent); New Orleans (+18.2 percent); Tampa, Fla. (+17.3 percent); Jacksonville, Fla. (+16.5 percent); and Birmingham, Ala. (+14.6 percent).
The metropolitan areas with the largest year-over-year decreases in loan defects during April were Milwaukee (-10.1 percent); Oklahoma City (-9.1 percent); Detroit (-4.9 percent); Austin, Texas (-4.4 percent); and Louisville/Jefferson, Ky. (-2.6 percent).