We’ve posted the June 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 1.2 percent in June 2017 as compared with the previous month, and increased 16.7 percent as compared to June 2016. The Defect Index is down 17.6 percent from the high point of risk in October 2013.

“The market shift toward more purchase mortgages, coupled with rising rates and tight inventory, is generating the consistent upward trend in defect risk.”

“Following seven straight months of increases, the Loan Application Defect Index is now at the same level as almost two years ago in July 2015,” said Mark Fleming, chief economist at First American. “The market shift toward more purchase mortgages, coupled with rising rates and tight inventory, is generating the consistent upward trend in defect risk. Purchase transactions are inherently more at risk of defects, fraud and misrepresentation, and the pressures resulting from one of the strongest sellers’ markets in recent memory compounds the risk of an error on a loan application.”

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.