We’ve posted the March 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 increased 1.3 percent in March as compared with February and decreased by 2.6 percent as compared with March 2015. The Defect Index increased modestly this month for the first time since July 2015, ending seven consecutive months of declining defect and misrepresentation risk.

“Southern-state economies face the challenges presented by falling prices in energy and agricultural commodity markets.” 

Last month, the analysis of the Defect Index spotlighted Texas and Florida as high risk areas of the country. Florida is risky because of the high concentration of condominiums that are popular among investor and foreign buyers in big markets, like Miami. Texas is experiencing the impact of challenges in the energy market spilling over into the real estate market. However, there are two other emerging-risk markets also in the South – Oklahoma and South Carolina.

“The cliché, ‘It’s the economy stupid,’ still holds true today, although it may be better applied locally. Southern-state economies face the challenges presented by falling prices in energy and agricultural commodity markets,” said Mark Fleming, chief economist at First American. “Economic distress increases the incentive for loan application misrepresentation, if not necessarily outright loan application fraud. In addition to Texas and Florida, Oklahoma and South Carolina are emerging risky states.”

For this information, the top five states and markets where defect risk is increasing or decreasing, and more, please visit the Loan Application Defect Index.