According to the November 2015 First American Loan Application Defect Index report, Florida has a high risk of fraudulence, misrepresentation, and defects in the information submitted in mortgage loan application due to the high concentration of sales to investors in the said state.
"While fraudulent and misrepresentative loan applications are continuing to decline, a few large markets remain at risk. In particular, the concentration of risk in Florida is a concern. All the major metropolitan areas in Florida are above the national average, and Miami ranks second among the top 100 markets nationally," said Mark Fleming, chief economist at First American. "Luckily, while the risk of loan defects in Florida is significantly higher than the national average, the risk is following the same downward trend as the national average. In fact, fraud and misrepresentation risk is down 7 percent over the last three months."
According to the press release of First American Financial Corporation in Business Wire, there is a 1.3 percent decrease in the November First American Loan Application Defect Index compared to October and has fell by 8.2 percent compared with November 2014. This is the fourth month-over-month decline in a row of defect and misrepresentation risk, making the lowest point in the index since its inception and wiping out the upward trend experienced during first half of the year. The Defect Index has fallen almost 5 percent over the last three months and is now well below the level of risk observed during the three years between 2011 and 2013.
"With misrepresentation and fraud risk falling overall, we can focus on the types of loan transactions that are the riskiest. Multi-unit investment properties jump out as significantly more prone to loan application defect risk than other occupancy or property types," added Fleming.
The Defect Index reflects estimated mortgage loan defects, misrepresentation, and fraudulence rates over time, by geography and by loan type.
