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Economic Center Blog

November 30, 2017

Loan Defect Risk Stabilizes Nationally, But Surges in Florida and Texas

Written by FirstAm Editor

We’ve posted the October First American Loan Application Defect Index, which estimates the frequency of defects, fraudulence and misrepresentation in the information submitted in mortgage loan applications. The Defect Index remains the same as compared with the previous month, and increased 22.1 percent as compared with October 2016. The Defect Index is down 18.6 percent from the high point of risk in October 2013.

                                                                                                                   

“The surge in defect, fraud and misrepresentation risk that started a year ago has finally lost momentum,” said Mark Fleming, chief economist at First American. Nationally, defect, fraud and misrepresentation risk has stabilized, but the local impact of recent natural disasters remains a concern.

   

“The data seems to validate our belief that there is a correlation between natural disasters and rising loan application defect risk. Our defect, fraud and misrepresentation risk index shows the largest month-over-month increases in defect risk are in hurricane-impacted markets,” said Fleming. “Even Houston, one of the largest markets in the country, is not immune to the rising defect risk.”


“Nationally, defect, fraud and misrepresentation risk has stabilized, but the local impact of recent natural disasters remains a concern.”


For the list of high risk markets with the fastest growing defect risk, the top five states and markets where defect risk is increasing or decreasing, and more, please visit the Loan Application Defect Index.

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Topics: Loan Application Defect Index