The rate of mortgage defects was down by more than 8% year-to-year during the month, according to First American Financial Corp.’s Loan Application Defect Index.
Among purchase mortgages, the defect rate was down more than 12%. At the state level, only California, Virginia and New Mexico registered gains in their defect rate and those gains were only on the order of a little over 1% year-over-year.
“This officially marks a six-month-long decline in defect, fraud and misrepresentation risk on purchase transactions, which have traditionally been considered higher risk. 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 Mark Fleming, chief economist at First American.
Only five major metropolitan markets experienced an increase in overall defect risk compared with a year ago, according to Fleming. Three of the five local areas registering higher year-to-year increases in defect rates contributed to overall increases in states where defect risk was higher.
The Virginia Beach core-based statistical area recorded a gain a little short of 16%, the Los Angeles defect rate rose by 12% and San Diego experienced a more than 7% increase in defect risk. Also, Orlando’s defect rate was up by more than 8% and in Memphis it was almost 4% higher, but despite this, defect risk decreased in Florida and Tennessee overall.
The decrease in overall defect rates continues to be driven by investment in technology that improves the quality of loan data, manufacturing and underwriting, according to Fleming.