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Economic Center Blog

September 29, 2017

What is Elevating Identity- and Collateral-Based Fraud Risk?

Written by FirstAm Editor

We’ve posted the August 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 remained the same in August 2017 as compared with the previous month, and increased 20.0 percent as compared to August 2016. The Defect Index is down 17.6 percent from the high point of risk in October 2013.


“Hurricanes, and particularly the flooding associated with these natural disasters, create the potential and opportunity for significant misrepresentation of collateral condition.”


“Last month, we reported that for the first time in 2017 the Loan Application Defect Index didn’t rise, but we advised caution in interpreting the one-month trend,” said Mark Fleming, chief economist at First American. “In August, the overall risk of defects, fraud and misrepresentation again didn’t change. It’s a positive sign that loan application risk has remained stable for two consecutive months, but given the recent high-profile data breaches that exposed the personal credit information of many U.S. consumers, the risk of identity-based fraud and misrepresentation is certainly elevated.”

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