There was a 1.3% uptick in mortgage application defects in September from the previous month, with states affected by Hurricane Florence showing preliminary spikes in activity following the storm, according to First American.
Compared with September 2017, the risk index is 6% lower, but
The First American Loan Application Defect Index for September was 78, up from 77 in August, but down from 83 in September 2017. The purchase application index increased for the first time this year, to 80 from 79 in August.
Refinance application defect risk rose to 70 from 69 in August, just shy of its high for the year of 71 in April and May.
"Beyond the devastating effect of hurricanes on the lives of those in their path and the damage on their homes, natural disasters also impact loan application defect risk," said First American Chief Economist Mark Fleming in a press release. "Hurricanes, especially the flooding associated with these natural disasters, create the potential and opportunity for significant misrepresentation of collateral condition and identity fraud in mortgage applications."
South Carolina had the
More recently, Hurricane Michael devastated the Florida Panhandle and that storm affected $125 million of residential real estate there, First American estimated.
Before Irma, Florida's defect index had peaked and was headed downward.
"However, following the storm, the trend reversed course in September 2017, rising 10% through December," Fleming said. "Since December 2017, defect risk has declined in Florida. Unfortunately, historical trends indicate that we should expect defect risk to increase in Florida over the next few months."
Over time, defect risk in hurricane-affected states stabilizes, but not at the same pace. While Florida's hurricane-driven defect risk subsided after three months, in the New York metropolitan area following Hurricane Sandy, it took nearly a full year for defect, fraud and misrepresentation risk to return to prestorm levels, he noted.