First American Financial Corporation’s Loan Application Defect Index for July 2015 found that the mortgage loan defect rate rose 4.9 percent in July compared to June. The Defect Index, which estimates the frequency of defects in the information submitted in mortgage loan applications and reflects them over time, by geography and by loan type increased 4.9 percent in July and decreased by 5.6 percent as compared to this time last year.
The index is down 17.5 percent from the high point of risk in September 2013. In recent months, the Defect Index for refinance transactions has increased dramatically, while still 6.3 percent lower than a year ago, its estimated defect incidence is up 8.7 percent month-over-month and 7.1 percent over the last three months. Meanwhile, the adjustable-rate mortgages continue to have consistently higher levels of application defect and fixed-rate mortgage defect risk surged with an 8.4 percent increase from last month.
While Fannie Mae's Book of Business dropped slightly at a compound annualized rate of 1.3 percent in July, the GSE's gross mortgage portfolio declined at a rate of 16 percent, marking the fourth month in a row ninth time in 12 months the portfolio declined at a double-digit annualized rate, according to Fannie Mae's July 2015 Monthly Volume Summary released Monday. Fannie Mae's gross mortgage portfolio has contracted at an average annualized rate of 11.6 percent for the first seven months of 2015 after contacting at an annualized rate of 15.8 percent for the entire year of 2014.