Loan Application Defect Risk High in High-Rise Condos, According to First American’s Loan Application Defect Index
—High-rise condominiums in coastal
- The frequency of defects, fraudulence and misrepresentation in the information submitted in mortgage loan applications remained the same compared with the previous month.
- Compared with
January 2017 , the Defect Index increased by 13.7 percent. - The Defect Index is down 18.6 percent from the high point of risk in
October 2013 . - The Defect Index for refinance transactions remained unchanged compared with the previous month, and is 16.9 percent higher than a year ago.
- The Defect Index for purchase transactions increased by 1.1 percent compared with the previous month, and is up 10.8 percent compared with a year ago.
Chief Economist Analysis: High Risk in Florida High Rises
“The overall defect, fraud and misrepresentation risk index remained unchanged, however, the index for purchase transactions increased in January,” said
“As the risk of fraudulent purchase transactions rises, understanding where risk lies is important,” said Fleming. “Florida is one of the largest markets in the country with concentrations of condominiums in the large coastal markets. The combination of size and rising defect, fraud, and misrepresentation risk in condominiums, makes
Additional Quotes from Chief Economist
- “Florida is currently the third riskiest state according to the defect, fraud and misrepresentation risk index, and by far the largest state among the five most risky. The other states in the top five are
Arkansas ,Idaho ,Wyoming and North Dakota.” - “While overall defect, fraud and misrepresentation risk in the
U.S. has remained stable for five consecutive months, defect risk inFlorida has been on the rise, increasing 6.5 percent since September 2017.” - “This may be partly driven by the popularity of high-rise condominiums in Florida’s large coastal metropolitan areas. Condominiums are the only property type for which defect, fraud and misrepresentation risk has increased in the last three months, up 1.1 percent nationally.”
- The five states with the greatest year-over-year increase in defect frequency are:
South Dakota (+39.7 percent),New Mexico (+29.9 percent),Wyoming (+24.4 percent),Oregon (+23.9 percent) andOhio (+23.1 percent). - There are two states with a year-over-year decrease in defect frequency:
Connecticut (-4.3 percent) andLouisiana (-3.4 percent).
- Among the largest 50 Core Based Statistical Areas (CBSAs), the five markets with the greatest year-over-year increase in defect frequency are:
Oklahoma City (+29.6 percent),Virginia Beach, Va. (+26.9 percent),Miami (+25.3 percent),Orlando, Fla. (+24.7 percent), andCleveland (+23.9 percent). - Among the largest 50 CBSAs, the three markets with a year-over-year decrease in defect frequency are:
Hartford, Conn. (-3.1 percent),Minneapolis (-2.6 percent), andRaleigh, N.C. (-2.5 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. © 2018 by First American. Information from this page may be used with proper attribution.
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