Connecticut was the lone state in the nation in September to see a decline in borrowers misrepresenting facts on mortgage loan applications, according to a new study, with the Bridgeport-Stamford region seeing an even greater improvement.
As of September, Connecticut's score on the First American Financial index dropped 2.8% from a year earlier — indicating fewer fraudulent applications — even as the index score popped more than 20% for all states nationally. The index overall remains down 18.6% from its all-time peak in October 2013.
In the coastal Fairfield County area, loan misrepresentations were down 6.2% both from a year ago and this past August.
"Last month, based on data from previous natural disasters, we highlighted the potential for increased mortgage loan application fraud risk due to the hurricanes in Florida and Texas," stated Mark Fleming, chief economist for Santa Ana, Calif.-based First American Financial, in a Tuesday statement accompanying the report. "Prior to the hurricanes, defect risk in Florida and Texas was declining, but that trend has reversed in September."
"In Houston, which was severely impacted by flooding, defect, fraud and misrepresentation risk surged 7.2%, the largest month-over-month increase among the top 50 metropolitan markets," Fleming added. "Flooding is associated with elevated risk for misrepresentation of collateral."
South Dakota had the biggest spike in loan misrepresentations on the index, with Raleigh, N.C., highest among the 50 metropolitan markets studied by First American Financial.
