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M R EP O RT | 53 SERVICING THE LATEST O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T Mortgage Fraud Frequency Falls Misrepresentation in information submitted in loan applications drops 1.5%. M ortgage fraud frequency is down, according to the First American Loan Ap- plication Defect Index for Decem- ber 2019. The frequency of defects, fraudulence and misrepresentation in the information submitted in mortgage loan applications decreased by 1.5% compared with the previous month. "After falling since March, overall defect risk stabilized in November, and then declined again in December. The overall Defect Index, which includes both purchase and refinance transactions, fell 1.5% compared with November, and is 23% lower than one year ago," said Mark Fleming, Chief Economist at First American. Defect risk declined by 34.3% from the high point of risk in October 2013, down 3.3% from the previous month for refinance transactions, but defects increased for purchase transactions. "While overall fraud risk declined in December, the pace of decline was slower than earlier in the year," Fleming added. "The Defect Index for purchase transac- tions increased 1.3% compared with November, while the Defect Index for refinance transactions fell 3.3%, its ninth straight month of declining risk." No state had a year-over-year increase in defect frequency. The five states with the greatest year-over-year decrease in defect frequency were West Virginia (-42.7%), Alaska (-35.1%), North Carolina (-31.9%), Virginia (-31.5%), and Indiana (-35.1%). "The declining fraud risk trend was consistent across the coun- try in December. Overall fraud risk did not increase in a single state or metropolitan area relative to one year ago, but fraud risk did rise in several markets on a month-over-month basis," said Fleming. "While declining fraud risk is the new norm, should market composition shift back toward a greater share of higher risk purchase transactions, or the sellers' market strengthens even further, we can expect an even slower pace of decline, or even a return to rising fraud risk."