Defect Risk Rising in Natural Disaster-Impacted Markets, According to First American Loan Application Defect Index
—Four of the top five markets with the greatest increases in defect risk are in
- The frequency of defects, fraudulence and misrepresentation in the information submitted in mortgage loan applications remained the same as compared with the previous month.
- Compared with
October 2016 , the Defect Index increased by 22.1 percent. - The Defect Index is down 18.6 percent from the high point of risk in
October 2013 . - The Defect Index for refinance transactions decreased 1.4 percent month-over-month, and is 19.0 percent higher than a year ago.
- The Defect Index for purchase transactions remained unchanged compared with the previous month, and is up 12.5 percent from a year ago.
Chief Economist Analysis: Defect Risk Increases in
“The surge in defect, fraud and misrepresentation risk that started a year ago has finally lost momentum,” said
“The data seems to validate our belief that there is a correlation between natural disasters and rising loan application defect risk. Our defect, fraud and misrepresentation risk index shows the largest month-over-month increases in defect risk are in hurricane-impacted markets,” said Fleming. “Even Houston, one of the largest markets in the country, is not immune to the rising defect risk.”
Additional Quotes from Chief Economist
- “Based on data from previous natural disasters, we recently highlighted the potential for increased mortgage loan application fraud risk in the hurricane-impacted states of
Florida andTexas , particularly fraudulent or unintentional misrepresentation of collateral condition.” - “This month, four of the five markets with the greatest increases in defect risk compared with September are in
Florida and Texas.”
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- “In fact, looking at the national map, there is a clear concentration of defect risk across the southern part of the country.”
- The five states with the greatest year-over-year increase in defect frequency are:
South Dakota (+50.8 percent),North Dakota (+47.1 percent),New Mexico (+38.5 percent),Iowa (+38.3 percent) andIdaho (+36.0 percent). - There is one state with a year-over-year decrease in defect frequency:
Connecticut (-4.3 percent).
- Among the largest 50 Core Based Statistical Areas (CBSAs), the five markets with the greatest year-over-year increase in defect frequency are:
Virginia Beach, Va. (+47.5 percent),Raleigh, N.C. (+34.8 percent),Orlando, Fla. (+28.6 percent),Kansas City, Mo. (+27.4 percent) andLouisville, Ky. (+27.1 percent). - There is one CBSA among the largest 50 CBSAs with a year-over-year decrease in defect frequency:
Hartford, Conn. (-1.6 percent).
Next Release
The next release of the First American Loan Application Defect Index will take place the week of
Methodology
The methodology statement for the First American Loan Application Defect Index is available at http://www.firstam.com/economics/defect-index.
Disclaimer
Opinions, estimates, forecasts and other views contained in this page are those of First American’s chief economist, do not necessarily represent the views of First American or its management, should not be construed as indicating First American’s business prospects or expected results, and are subject to change without notice. Although the First American Economics team attempts to provide reliable, useful information, it does not guarantee that the information is accurate, current or suitable for any particular purpose. © 2017 by First American. Information from this page may be used with proper attribution.
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