The risk of bad data in mortgage applications was held in check, and government-sponsored enterprise initiatives will help even more next year.
As of November of this year, the Loan Application Defect Index, which reflects estimated mortgage loan defect rates over time, was 68.
The index estimates the frequency of defects, fraudulence and misrepresentation in the information submitted in mortgage loan applications.
Compared to one month earlier, the index was virtually the same.
But a 13 percent reduction was recorded in the index versus 12 months earlier.
First American Financial Corp. reported the index Thursday based on
applications processed by the First American FraudGuard system.
“The long and consistent downward trend in loan application defect and misrepresentation risk paused this month, after falling in seven of the last eight months,” First American Chief Economist Mark Fleming stated in the report. “Yet, I expect the risk trend to continue its downward trajectory in 2017.
“The Day 1 Certainty initiative at Fannie Mae and incorporation of similar automated verification tools at Freddie Mac are likely to have a significant positive impact on mortgage loan application defect and misrepresentation risk in the next year.”
In Arkansas, November 2016’s index was 86 — worse than any other state. After that was 84 in Louisiana, then 82 in Vermont, 81 in Hawaii and 81 in Montana.
At 77, the index for the District of Columbia was up from October by 4 percent — worse month-over-month deterioration than in any state.
On U.S. refinance transaction, the index declined 3 percent from October 2016. The index on purchase financing was unchanged.
