August Loan Application Defect Index
The First American Loan Application Defect Index remained unchanged in August as compared with July and decreased by 14.6 percent as compared with
“Based on the newly released
“While FHA loans are generally considered to have higher credit risk than conventional loans, according to the Defect Index, conventional loan risk is down 14.6 percent over a year ago, compared with a year-over-year decline of 17.7 percent for transactions involving FHA/
The Defect Index for refinance transactions is unchanged compared to last month, and is 18.1 percent lower than a year ago. The Defect Index for purchase transactions is flat month-over-month, and is down 10.2 percent compared to a year ago. Since defect risk for both purchase and refinance transactions peaked in late 2013, defect risk on refinance transactions continues to decline much more than defect risk for purchase transactions, declining 41.0 percent as compared to 24.0 percent for purchase transactions.
“Our collaboration with the
- The five states with the highest year-over-year increase in defect frequency are:
Maine(+19.2 percent), North Dakota(+13.6 percent), Missouri(+8.7 percent), Montana(+5.3 percent) and Vermont(+5.1 percent).
- The five states with the highest year-over-year decrease in defect frequency are:
Michigan(-29.4 percent), Florida(-23.8 percent), Arizona(-19.3 percent), Oklahoma(-19.1 percent), and New Mexico(-19.0 percent).
- Among the largest 50 Core Based Statistical Areas (CBSAs), the only market with a year-over-year increase in defect frequency is:
St. Louis(+2.7 percent).
- Among the largest 50 CBSAs, the five markets with the highest year-over-year decrease in defect frequency are:
Detroit(-33.9 percent); Oklahoma City(-27.8 percent); Louisville/ Jefferson, Ky.(-27.1 percent); Orlando, Fla.(-25.8 percent); and Jacksonville, Fla.(-24.7 percent).
Rising Purchase Demand Helps Drive Declining Defect Risk
“As mentioned above, the FHA has increased its market share over the last year, according to analysis we publish in the NMMI. Additionally, in that report, we identified
“In Atlanta, the year-over-year growth rate for purchase loans accelerated almost 20 percent between the third quarter of 2015 and the second quarter of 2016. Over the same time period, the year-over-year growth rate for FHA purchase loans accelerated 25 percent,” said Fleming. “Atlanta is one of the country’s fastest growing markets, where purchase demand is facilitated by the availability of credit made possible with FHA loans. As a result, our loan application defect and fraud risk index for
“Charlotte is another southern city experiencing a renaissance and purchase loan demand boom. The year-over-year growth rate for purchase loans in
“This month, rather than focus on markets with increased risk, we’re highlighting markets that have improved – cool spots,” said Fleming. “Atlanta and
The next release of the First American Loan Application Defect Index will be posted the week of
The methodology statement for the First American Loan Application Defect Index is available at http://www.firstam.com/economics/defect-index.
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