The index estimates the frequency of defects, fraudulence and misrepresentation in the information submitted in mortgage loan applications. It estimates mortgage loan defect rates over time, by geography and loan type.

The index also fell by 28.6% compared to January 2019 and is down 36.3% from the high point of risk in October 2013. The Defect Index for refinance transactions decreased by 5.2% compared with the previous month, and decreased by 33.7% compared with a year ago. The Defect Index for purchase transactions remained the same compared with the previous month, and is down 17.9% compared to a year ago.

“Overall defect risk, as measured by our Loan Application Defect Index, has largely trended down since early 2019 with a few exceptions,” said Mark Fleming, chief economist at First American. “In January 2020, this long-run trend continued as overall defect risk reached its lowest level since we began tracking it in 2011.”

“While the Defect Index for purchase transactions remained the same after two months of increasing risk, the Defect Index for refinance transactions fell 5.2% compared with the previous month, pulling the overall defect risk levels to this new low point,” Fleming said. “We can thank the increasing share of less risky refinance transactions for the low levels of defect and fraud risk.”