While mortgage application defect risk declined overall in March, at the local level it varied considerably, according to First American Financial Corp.'s Loan Application Defect Index.

The loan application defect risk for individual markets is dictated by housing market conditions like economic factors and access to natural amenities, such as water or mountains.

Little Rock, Ark., was the riskiest market in March, and was nearly twice as risky as Rochester, N.Y., which was the safest.

"There appears to be a high concentration of markets with elevated defect risk in the Sun Belt states and a high concentration of markets with lower defect risk in the Rust Belt states," says Chief Economist Mark Fleming, in a press release.

Miami and Knoxville, Tenn., were also among the riskiest markets in March, while Scranton, Pa., and Toledo, Ohio, were some of the safest.

Property types also tend to influence the potential risk of loan application defects, with transactions involving condominiums carrying greater risk than those for single-family homes. Similarly, purchase transactions typically face greater defect risk than refinance transactions.

On a national scale, the frequency of defects, fraudulence and misrepresentation in mortgage loan applications fell by 1.2% from February to March, but still increased by 3.8% from a year ago.

Among states with the greatest annual increase in defect frequency were Wyoming and Arkansas, where it rose 19% and 17.8%, respectively. The state leaders in year-over-year declines in risk were Louisiana and Minnesota, where defect risk fell 11.8% and 8.4%, respectively.

Historically, the Defect Index sits 19.6% below its highest point of risk, which occurred in October 2013.

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