Shift to Accommodate Millennial Home Buying Preferences Reduces Loan Application Defect Risk, According to First American’s Loan Application Defect Index
—The investment in technology to better serve millennial first-time homebuyers also helped make the manufacture and underwriting of mortgage loans less risky, says Chief Economist
- The frequency of defects, fraudulence and misrepresentation in the information submitted in mortgage loan applications decreased by 3.8 percent compared with the previous month.
- Compared to
June 2017 , the Defect Index decreased by 8.3 percent. - The Defect Index is down 24.5 percent from the high point of risk in
October 2013 . - The Defect Index for refinance transactions is down 2.8 percent compared with the previous month, and is 1.4 percent lower than a year ago.
- The Defect Index for purchase transactions decreased by 3.6 percent compared with the previous month, and is down 12.1 percent compared with a year ago.
Chief Economist Analysis: How Millennial Home Buying Expectations Unintentionally Reduced Loan App Defect Risk
“As the mortgage market has continued its transition away from refinances to a predominantly purchase-oriented loan market, the Defect Index for purchase transactions has continued to decline, dropping 3.6 percent in the last month and 12.1 percent in the last year,” said
“Not only is the national trend positive, but loan application defect, fraud and misrepresentation risk is declining in practically every market in the nation,” said Fleming. “Only five major metropolitan markets experienced an increase in overall defect, fraud and misrepresentation risk compared with a year ago. Many markets experienced significant declines of 10 percent or more.
“Is millennial demand for homeownership behind this trend? In addition to their desire to be homeowners, millennials also expect a convenient, digital, highly automated and all-around better home-buying experience. The mortgage finance industry has invested heavily in technology to meet this demand to compete for millennials’ mortgage loan business,” said Fleming. “The technology investment that has occurred in the mortgage industry in recent years to better serve millennial first-time home buyers also helped make the manufacture and underwriting of mortgage loans less risky with fewer defects and misrepresentation on loan applications. Sometimes, unintended consequences aren’t so bad.”
- The three states with a year-over-year increase in defect frequency:
California (+1.3 percent),Virginia (+1.3 percent) andNew Mexico (+1.2 percent). - The five states with the greatest year-over-year decrease in defect frequency are:
South Carolina (-25.0 percent),Vermont (-21.8 percent),Minnesota (-19.5 percent),Alabama (-19.1 percent) andNorth Carolina (-17.4 percent).
- Among the largest 50 Core Based Statistical Areas (CBSAs), the five markets with the greatest year-over-year increase in defect frequency are:
Virginia Beach, Va. (+15.6 percent),Los Angeles (+12.0 percent),Orlando, Fla. (+8.4 percent),San Diego (+7.5 percent), andMemphis, Tenn. (+3.9 percent). - Among the largest 50 Core Based Statistical Areas (CBSAs), the five markets with the largest year-over-year decrease in defect frequency are:
Birmingham, Ala. (-26.3 percent),Raleigh, N.C. (-23.7 percent),Minneapolis (-20.9 percent),Austin, Texas (-20.9 percent), andPittsburgh (-20.5 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.
About First American
View source version on businesswire.com: https://www.businesswire.com/news/home/20180731005263/en/
Corporate Communications
Source:


Venator Announces Second Quarter 2018 Results
World Insurance Associates LLC Acquires Northern Insurance Group/Worldwide Risk Management, Inc. of Portland and Jackman, ME and Plantation, FL
Advisor News
- I started using AI, but what now?
- How to support an entrepreneur client with multiple businesses
- Could a narrower focus help grow your practice?
- U.S. debt hits $40 trillion: how to support concerned clients
- Flourish brings private-bank-like cash solution to MassMutual’s network
More Advisor NewsAnnuity News
- MassMutual Expands Lending Options With New Secured Credit Line
- Corebridge Financial Introduces Progressive Trigger, a First-of-Its-Kind Index Annuity Strategy Designed to Turn Missed Years into Future Opportunity
- Insurer proposes $1.1M deal to resolve CA teachers’ annuity fee lawsuit
- IMOs get frustrated with slow carrier adoption of faster technology
- New class-action lawsuit targets Delaware Life over annuity disclosures
More Annuity NewsHealth/Employee Benefits News
- Minnesota seniors face tough choices for health plans
- Recent Findings from New York University (NYU) Langone Health Provide New Insights into Managed Care (State Medicaid Body Mass Index Requirements for Solid Organ Transplant Coverage: A 50-State Policy Review): Managed Care
- After booting 760K off ACA health plans, the Trump administration adds some people back
- New Findings from University of Hawaii at Manoa in the Area of Science Reported (Expanded Medi-Cal Coverage and Persisting Access Barriers for Latino Immigrants in California): Science
- What’s shaping retirement readiness in healthcare?
More Health/Employee Benefits NewsLife Insurance News