Mortgage app fraud risk levels off, except in Texas and Florida

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While the nationwide run-up in mortgage loan application defects appears to have slowed, instances of fraud remain on the rise in Texas and Florida.

The First American Loan Application Defect index remained unchanged for the second straight month in October, but is up 22.1% from October 2016.

Defect risk spiked between November 2016, when it hit an all-time low, and June. Loan application defects are indicators for mortgage fraud.

"The surge in defect, fraud and misrepresentation risk that started a year ago has finally lost momentum," said First American's Chief Economist Mark Fleming in a press release. "The Loan Application Defect Index has either remained unchanged or declined in every month since July, and the index value is the same level as in the summer of 2015. Nationally, defect, fraud and misrepresentation risk has stabilized, but the local impact of recent natural disasters remains a concern."

Texas' defect index rose 1.16% in October from September to 87, while in Florida it rose 3.26% to 95. In Houston, the index increased 5.62% between September and October, to 94.

The only markets with a larger month-over-month increase in loan application defects were Lakeland, Fla., up 11.9%; Virginia Beach, Va., up 8.4%; Cape Coral, Fla., up 5.9%; and Orlando, up 5.9%.

Miami had the third-highest risk index for metro areas, at 100, up 5.3% from September. It trailed only Little Rock, Ark., at 108 and Boise City, Idaho at 104.

The state with the highest risk for loan application defects is Arkansas, with an index value of 105, followed by North Dakota at 103, Idaho at 102, Montana at 101 and Mississippi at 98.

For purchase loans, the defect index was 90, unchanged from September, but up 12.5% from 80 one year ago. The defect risk for refinance mortgages decreased slightly, by 1.4% to 69 from 70 in September. This was an increase of 19% from October 2016's 58.

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Mortgage fraud Risk analysis Fraud detection Real estate Hurricane Harvey Hurricane Irma First American Financial Corp. Texas Florida Arkansas North Dakota Idaho Montana Mississippi