Industry Update: the Future of eClosing and RON

Join industry experts for an in-depth discussion on the future of eClosing and how hybrid and RON closings benefit lenders and borrowers.

DOJ v. NAR and the ethics of real estate commissions

Today’s HousingWire Daily features the first-ever episode of Houses in Motion. We discuss the Department of Justice’s recent move to withdraw from a settlement agreement with the NAR.

Hopes for generational investment in housing fade in DC

Despite a Democratic majority, the likelihood of a massive investment in housing via a $3.5 trillion social infrastructure package appears slim these days. HW+ Premium Content

How Biden’s Neighborhood Homes proposal impacts real estate investors

Dubbed the Neighborhood Homes Tax Credit, the proposal is part of the larger American Jobs Plan legislation — also known as Biden’s infrastructure plan. Here's a look into how it impacts real estate investors.

Mortgage

Fraud risk on purchase mortgages climbs for the first time since March

The Defect Index for purchase transactions increased by 2.7% In November

For the first time since March, First American’s Loan Application Defect Index indicates the nation’s mortgage defect risk increased, but only for purchase mortgages.

According to the company, the Defect Index for purchase transactions increased by 2.7% in November compared with October, while the Defect Index for refinance transactions fell by 1.6%.

Although it should be noted, that both purchase and refinance defect risk are down from last year.

Mark Fleming, First American’s chief economist, said overall defect risk has been declining since March of this year, and November marks a pause to this trend.

“After falling since March, the Defect Index for purchase transactions increased 2.7% compared with October, while the Defect Index for refinance transactions fell by 1.6%, its eighth straight month of declining risk,” Fleming said. “The overall Defect Index, which includes both purchase and refinance transactions, remained the same compared with last month, and is 16% lower than one year ago.”

So, what sparked the recent increase in purchase fraud risk? Fleming said it has a lot to do with the nation’s house-buying power, which declined in October when mortgage rates began to tick back up.

“In 2019, the average monthly growth rate of house-buying power through September was 1.6%. Over the two months of October and November combined, house-buying power declined 0.6% relative to September,” Fleming said. “The slowdown in house-buying power appreciation lessens the confidence of home buyers, so they may be more inclined to misrepresent information on a loan application, leading to an increase in the Defect Index for purchase transactions.”

Heading into 2020, Fleming said the direction of defect risk is in large part dependent on mortgage rates and how many homeowners that are ‘in the money’ choose to refinance.

“Slightly higher mortgage rates through the end of the year may result in a small dip in house-buying power and a further pullback in refinance demand. But, looking ahead to 2020, mortgage rates are expected to remain below 4%,” Fleming said. “At that level, there are still 6.8 million borrowers today who could benefit financially by refinancing to a lower mortgage rate.”

NOTE: First American’s Loan Application Defect Index measures the frequency of which defect indicators are identified. The index is benchmarked to a value of 100 in January 2011, meaning all index values are interpreted as the percentage change in defect frequency relative to that time, according to the company.

Most Popular Articles

The housing market is losing steam

Mortgage applications for new home purchases decreased 3% from May and 23.8% year over year, suggesting buyer fatigue in the housing market.

Jul 20, 2021 By
3d rendering of a row of luxury townhouses along a street

Log In

Forgot Password?

Don't have an account? Please