Riskier purchase transactions partly caused the five-month loan fraud and defect trend, says expert
Defects, fraud and misrepresentation in mortgage loan applications increased by 2.5% in April – marking the fifth consecutive month of loan defect increases – according to First American Financial.
Year over year, First American’s defect index rose 8%, but saw a decrease of 20.6% from the high point risk in October 2013.
“The Loan Application Defect Index continued its strong upward increase for the fifth consecutive month,” said Mark Fleming, chief economist at First American. “The pace of defect risk growth is as strong as we have seen since the index began in 2011, adding to the concern over the five-month trend. While we have recently noted that part of the rise in overall risk is due to the market’s shift toward riskier purchase transactions, the fact that risk in refinance transactions is also on the rise underscores the need for caution.”
Meanwhile, refi transaction defects rose 4.8% month over and 3.1% year over year; purchase transaction defects went up by 2.3% month over month and increased 7.2% year over year.
South Dakota, Wyoming, North Dakota, West Virginia and Iowa posted the highest year-over-year increase in defect frequency. Connecticut and Oklahoma had the greatest decreases in year-over-year defect frequency.
Related stories:
Fraud, defects in mortgage apps hit four-month high
Fraud on the rise in mortgage applications
Year over year, First American’s defect index rose 8%, but saw a decrease of 20.6% from the high point risk in October 2013.
“The Loan Application Defect Index continued its strong upward increase for the fifth consecutive month,” said Mark Fleming, chief economist at First American. “The pace of defect risk growth is as strong as we have seen since the index began in 2011, adding to the concern over the five-month trend. While we have recently noted that part of the rise in overall risk is due to the market’s shift toward riskier purchase transactions, the fact that risk in refinance transactions is also on the rise underscores the need for caution.”
Meanwhile, refi transaction defects rose 4.8% month over and 3.1% year over year; purchase transaction defects went up by 2.3% month over month and increased 7.2% year over year.
South Dakota, Wyoming, North Dakota, West Virginia and Iowa posted the highest year-over-year increase in defect frequency. Connecticut and Oklahoma had the greatest decreases in year-over-year defect frequency.
Related stories:
Fraud, defects in mortgage apps hit four-month high
Fraud on the rise in mortgage applications
