Compared to September 2018, the Defect Index dropped by 11.5%. The Defect Index is down 32.4% from the high point of risk in October 2013. Its also important to note that The Defect Index for refinance transactions decreased by 4.5% compared to the previous month and is down 10% compared with a year ago.The Defect Index for purchase transactions decreased by 2.6% compared with the previous month and is down 6.3% compared to a year ago.

“Declining for the sixth consecutive month, the Loan Application Defect Index for purchase transactions fell 2.6% in September compared with August," said Mark Fleming, chief economist at First American. "The Defect Index for refinance transactions also fell, declining 4.5% compared with the previous month,”

Economy Up, Fraud Down?
“While the rising share of refinance transactions and weakening sellers’ market conditions have helped reduce fraud risk in 2019, there are some other factors at play as well," Fleming said. "Rising household income driven by the strong labor market and lower mortgage rates have increased consumer house-buying power and helped boost consumer confidence. As consumer house-buying power and consumer confidence swell amid the strong labor market, the pressure to misrepresent income and employment in mortgage applications declines."

September 2019 State Highlights
The five states with a year-over-year increase in defect frequency are:

• South Dakota (+11.1%)
• Nebraska (+9.3%)
• New York (+6.3%)
• Iowa (+5.1%)
• Wisconsin (+1.3%)

The five states with the greatest year-over-year decrease in defect frequency are:

• Alaska (-21.4%)
• Florida (-19.1%)
• Texas (-18.8%)
• Virginia (-18.3%)
• New Hampshire (-16.7%).