The frequency of defects, fraudulence and misrepresentation in the information submitted in mortgage applications fell 3.0% in January compared with December and was down 28.6% compared with January 2019, according to First American’s Loan Application Defect Index.
What’s more, the rate of defects was down 36.3% compared with the high point of risk in October 2013.
The rate of defects in applications for refinances was down 5.2% month-over-month and down 33.7% year-over-year.
The rate of defects in applications for purchases was flat compared with the previous month and down 17.9% compared with a year ago.
“Overall defect risk, as measured by our Loan Application Defect Index, has largely trended down since early 2019 with a few exceptions,” says Mark Fleming, chief economist at First American. “In January 2020, this long-run trend continued as overall defect risk reached its lowest level since we began tracking it in 2011.”
“We can thank the increasing share of less-risky refinance transactions for the low levels of defect and fraud risk,” Fleming says.
He adds that if mortgage rates continue to drop, it will likely spur more refinance activity, and “the risk of defect, fraud and misrepresentation will continue to decline.”
