SANTA ANA, Calif.--(BUSINESS WIRE)--First American Financial Corporation (NYSE: FAF), a leading global provider of title insurance, settlement services and risk solutions for real estate transactions, today released the First American Loan Application Defect Index for July 2018, which estimates the frequency of defects, fraudulence and misrepresentation in the information submitted in mortgage loan applications. The Defect Index reflects estimated mortgage loan defect rates over time, by geography and loan type. It is available as an interactive tool that can be tailored to showcase trends by category, including amortization type, lien position, loan purpose, property and transaction types, and can provide state- and market-specific comparisons of mortgage loan defect levels.

July 2018 Loan Application Defect Index

The frequency of defects, fraudulence and misrepresentation in the information submitted in mortgage loan applications decreased by 1.3 percent compared with the previous month.

Compared to July 2017, the Defect Index decreased by 9.5 percent.

The Defect Index is down 25.4 percent from the high point of risk in October 2013.

The Defect Index for refinance transactions is the same as previous month, and is 2.8 percent lower than a year ago.

The Defect Index for purchase transactions decreased by 1.3 percent compared with the previous month, and is down 13.2 percent compared with a year ago.

Chief Economist Analysis: FinTech Investment Helping Reduce Defect Risk

“The Loan Application Defect Index for purchase transactions continued its downward trend, declining 1.3 percent in July compared with the month before, the seventh consecutive month defect risk in purchase transactions have fallen,” said Mark Fleming, chief economist at First American. “Yet, is declining loan application misrepresentation, defect and fraud risk isolated to a few markets or is the trend more geographically broad based?

“The Defect Index also measures loan application misrepresentation, defect and fraud risk over time in 50 of the largest markets in the U.S. When analyzing local market level data, comparing data at three-month intervals tends to be more helpful in identifying trends than data from more volatile month-to-month comparisons,” said Fleming. “Nationally, the Defect Index decline of 7.3 percent in July relative to three-month moving average was driven by declining risk in all but two markets – New Orleans and Louisville, Ky. In every other market, loan application, misrepresentation, defect and fraud risk declined. In some markets the decline was substantial. In 39 markets, defect risk declined more than 5 percent, while the three-month decline in risk exceeded 10 percent in 11 markets.

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