First American: Fraud Rises in South, Decreases in North
First American Financial Corp., Santa Ana, Calif., said its monthly Loan Application Defect Index fell in October, but noted an increase in the busy South region.
The report said frequency of defects, fraudulence and misrepresentation in the information submitted in mortgage loan applications decreased by 1.4 percent in October from September. From a year ago, the Defect Index decreased by 13.9 percent and is now 33.3 percent below its peak in October 2013.
The Defect Index for refinance transactions decreased by 1.7 percent month-over-month and is 15.9 percent lower than a year ago. The Defect Index for purchase transactions is unchanged compared to last month, and is down 5.9 percent compared to a year ago.
“The post-election sudden increase in mortgage rates has accelerated the shift away from a refinance-driven market toward a purchase-dominated market,” said First American Chief Economist Mark Fleming. “The overall decline in loan application and defect risk will slow as rates continue to rise into 2017 and the share of higher risk purchase loans increases.”
The report said Cotton states in the South showed highest levels of risk, compared to the northern rust-belt, where application and defect risk is currently lowest.
“Defect, fraud and misrepresentation risk can vary substantially by location,” Fleming said. “Defect risk is concentrating in the South, particularly in Arkansas and Louisiana, as well as in large markets in Texas and South Carolina.”
Other report metrics:
–McAllen, Texas; Houston; Columbia, S.C.; Birmingham, Ala. and Charleston S.C. currently have the highest loan application defect and misrepresentation risk in the nation. New Orleans; Baton Rouge, La. and Little Rock, Ark. are also ranked highly for defect risk among the largest 100 metropolitan areas of the country.
–Comparatively, markets in the northeast states of New York, Pennsylvania, and Ohio have the least loan application defect and misrepresentation risk.”
–States with the highest year-over-year increase in defect frequency were Maine (+30.6 percent), South Dakota (+19.6 percent), Vermont (+15.1 percent), North Dakota (+11.1 percent) and Wyoming (+11.1 percent).
–States with the highest year-over-year decrease in defect frequency were Michigan (-21.7 percent), Florida (-19.8 percent), California (-19.5 percent), Oklahoma (-17.0 percent), and Rhode Island (-16.7 percent).
–Among the largest 50 metro areas, the only one market with year-over-year increase in defect frequency was St. Louis (+4.2 percent). Markets with the highest year-over-year decrease in defect frequency were Louisville/Jefferson, Ky. (-28.9 percent); Detroit (-27.5 percent); Sacramento, Calif. (-25.3 percent); Orlando, Fla. (-24.7 percent); and Oklahoma City (-24.5 percent).
