Defects in single-family loan applications remain substantially higher than one year ago. But defects have more recently stabilized and are likely to remain stable.
An estimate of the frequency of defects, fraud and misrepresentation in mortgage application information, the Loan Application Defect Index, was 83 in November.
That turned out to be the same as the previous month. But the level of defects deteriorated from the same month last year, when the index was previously reported at a record-low 68.
The year-over-year deterioration in the index, which was reported Thursday by First American Financial Corp., was primarily driven by an increase in the share of purchase mortgage transactions — which tend to be more risky.
“After a year of significant change, defect risk has stabilized, with no change in the overall level of defect risk in three of the last four months,” First American Chief Economist Mark Fleming said in the report.
Fleming added that heading into next year, “there is reason to be optimistic about defect, fraud and misrepresentation risk.”
On refinance applications, the index has deteriorated more than 23 percent from November 2016.
But the index for purchase transactions was up just 14 percent from the report a year ago.
Overall, Arkansas had the highest index last month: 105. After that was 102 in Idaho, then 101 in North Dakota and 99 in both Florida and Montana.
At just 63, New Hampshire had the lowest level of defects.
On a year-over-year basis, the index in South Dakota has surged by 51 percent — the most deterioration of any state. That left the state’s latest index at 89.
