The First American Loan Application Defect Index for February 2020 shows that the frequency of defects, fraudulence and misrepresentation in the information submitted in mortgage loan applications decreased by 4.6% compared with January and decreased by 34.7% compared to February 2019.
The company notes that the index is down 39.2% from its high point, in October 2013.
The defect index for refinance transactions decreased by 5.5% compared with the previous month and decreased by 39.5% compared with a year ago. The index for purchase transactions decreased by 2.6% compared with January and is down 23.2% compared with a year ago.
“There’s a lot of uncertainty in the economy and mortgage markets these days,” says Mark Fleming, chief economist at First American. “While fraud risk will never be zero, it is certainly in a better place today than it was nearly a decade ago. Today’s housing market of today benefits from new technology and policy guardrails against fraud and defect risk – innovations that will serve the industry well in the uncertain days ahead.”
The five states with the greatest year-over-year decrease in defect frequency are West Virginia (-51.0 percent), North Carolina (-42.9 percent), Indiana (-42.3 percent), Montana (-42.2 percent) and Virginia (-42.2 percent).
Among the largest 50 Core Based Statistical Areas (CBSAs), the five markets with the greatest year-over-year decrease in defect frequency are Richmond, Va. (-44.3 percent), Detroit (-43.3 percent), Virginia Beach, Va. (-43.0 percent), San Diego (-41.2 percent) and Indianapolis (-41.1 percent).