First American’s Loan Application Defect Index has dropped 23.5 percent since it reached its zenith in Oct. 2013. “We had a spike at the beginning of last year,” First American Chief Economist Mark Fleming said on Monday. “That faded in the second half of the year.”
Defects come from applicants lying about some information—SS number, income, vacation home called primary. Loans can have several irregularities, and there are many that can crop up, as MHProNews has learned.
Fraud risk carried by investors and lenders also has extensive possibilities: borrowers get a better rate if they occupy the home; or they claim their manufactured home is a single-detached home, which has a lower mortgage.
In any case, says Fleming, he does not know if the defects are innocent mistakes or fraud, but more defects coincide with more fraud risk. “We know that risk is rising as that average [defects are] rising, and risk is falling as that average is falling,” Fleming said.
He noted Florida has a much higher preponderance of defects, but the rate has fallen seven percent in the last three months. ##
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