Investments in mortgage compliance are having a positive effect on the level of risk associated with loan defects and misrepresentations in home loan applications.
The Loan Application Defect Index,
a reflection of estimated residential loan defect rates over time, was off more than 1 percent between January and February.
In addition to being the seventh month in a row without an increase, the index fell to its lowest point since it was benchmarked at a value of 100 as of January 2011.
First American
Financial Corp., which publishes the index, noted that it was down by more than 5 percent from February 2015.
The index reportedly estimates the frequency of defects, fraudulence and misrepresentation of the information submitted in residential loan applications.
Compared to the high reached in October 2013, the index has retreated by more than a quarter.
“The continued decline in loan application and mortgage defect risk is indicative of the benefits the industry is accruing from investments in technology and improved production standards,” First American Chief Economist Mark Fleming said in the report. “The investments to improve compliance are producing real benefits in the form of higher quality loan manufacturing processes with fewer defects and less misrepresentation.”
Florida was the highest-risk state during February 2016.
The index in Utah was up 10 percent from February 2015, the biggest increase. Kentucky and South Carolina rose nearly 9 percent, the District of Columbia
increased 8 percent and Texas worsened 5 percent.
But in Alabama, the index was down more than 17 percent — the biggest improvement of any state.
On just refinances, the U.S. index was unchanged from January 2016 and down by nearly a 10th from a year earlier.
A more than 1 percent month-over-month decline was reported for U.S. purchase financing, while the year-over-year drop was nearly 5 percent.
