Critical Loan Defect Rate Drops For First Time In 2017

ACES Risk Management (ARMCO), a provider of enterprise financial risk mitigation software solutions, has released the ARMCO Mortgage QC Trends Report. The latest report is for the third quarter of 2017, which relays loan quality findings for mortgages reviewed by ACES Audit Technology between July 1, 2017 and September 30, 2017.

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The report’s noteworthy findings include:

>>The Q3 2017 critical defect rate declined 6 percent from the previous quarter, revealing the first decrease in this rate for 2017

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>>The percentage of purchase transactions declined in Q3 2017

>>Purchase transactions and FHA loans accounted for a disproportionately higher number of critical defects in Q3 2017

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“As the percentage of refis increased in the third quarter of 2017, we saw a drop in critical defect rates. That said, purchases still comprise the majority of mortgages originated, so critical defect activity still aligns with what you’d see in a purchase-driven market,” said Phil McCall, president of ARMCO. “Lenders need to be mindful of the risks inherent with purchase transactions and take precautions, regardless of fluctuations in purchase/refi market share.”
The ARMCO Mortgage QC Industry Trends Report is based on nationwide post-closing quality control loan data from just under 100,000 loans selected for random full-file reviews, as was captured by the company’s ACES Analytics benchmarking software. Defects listed in the report are categorized using the Fannie Mae loan defect taxonomy.
Each ARMCO Mortgage QC Industry Trends report includes easy-to-read charts and graphs, a summary that outlines ARMCO’s overall findings, a breakdown of defect rates for each Fannie Mae loan defect category, and a short conclusion. The current and previous reports also contain an analysis of the top credit-related critical defects, which is now a regular feature of the report. ARMCO issues a one-year analysis for the calendar year with each fourth quarter Mortgage QC Industry Trends Report.

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