The First American Loan Application Index has indicated in a spike in the frequency of defects, fraudulence, and misinterpretation in mortgage applications in April 2017. The rise implies the need to exercise caution, according to First AmericanChief Economist Mark Fleming.
Report Highlights
Compared to March of this year, the prevalence of fraud, defects, and misinterpretation in the information appearing on the mortgage loan application increased by 2.5 percent in April.
Compared to April 2016, The Defect index has increased by 8 percent in the same month this year.
Although the continuous uphill has been observed for the recent months, it is still well below the highest peak recorded since the index began in 2011. The index is still down 20.6 percent from October 2013 when the high point of risk was seen.
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Index Up for Both Purchase and Refi
For home purchase transactions, the Defect Index has risen 2.3 percentage points on a month-over-month basis. It is also up by 7.2 percent to a year earlier. The index was also on a rise for refinancing activities. It increased 4.8 percent from the previous month and is 3.1 percent above the index of the same month last year.
Chief Economist Mark Fleming said, “Part of the rise in overall risk is due to the market‘s shift toward riskier purchase transactions, but the fact that risk in refinance transactions is also on the rise underscores the need for caution. The Loan Application Defect Index continued its strong upward increase for the fifth consecutive month.” He added, “The pace of defect risk growth is as strong as we have seen since the index began in 2011, adding to the concern over the five-month trend.”
