The quarterly defect rate declined 25.5% over Q3, though the annual defect rate remained above 2% for 2022 /CitizenWire/ — ACES Quality Management® (ACES), the leading provider of enterprise quality management and control software for the financial services industry, announced the release of its quarterly ACES Mortgage QC Industry Trends Report covering the fourth quarter (Q4) of 2022, as well as the full calendar year (CY). The latest report analyzes post-closing quality control data derived from ACES Quality Management & Control® software.
Notable findings from the Q4/CY 2022 report include the following:
* The overall critical defect rate declined 25.5% over Q3 2022, ending the quarter at 1.84%.
* Due to two consecutive quarters of +2% defect rates, the overall rate for CY 2022 was 2.07%.
* Of the four major underwriting categories, Credit improved considerably over Q3, while Liabilities achieved a more modest improvement. Both Assets and Income/Employment increased significantly, ending Income/Employment’s multi-quarter trend of decline.
* Income/Employment remained the leading category of defects reported, with Assets and Borrower and Mortgage Eligibility completing the top three categories of defects cited.
* A sub-category analysis of the Assets and Income/Employment categories found documentation to be the leading driver of defects within these two categories.
* Appraisal defects also increased in Q4, ending another multi-quarter trend of decline.
* Purchase share remained high in Q4, with the industry achieving defect parity for the quarter.
* Despite declining in terms of review share, FHA defects increased for the second consecutive quarter, as did conventional loans. USDA and VA loan defects continued to improve.
“After last quarter’s historic high of 2.47%, the reduction in Q4’s critical defect rate to a sub-2% level is encouraging and illustrates just how much the precipitous drop in origination volumes impacted lending operations,” said ACES Executive Vice President Nick Volpe. “However, lenders are starting to see the GSEs take an aggressive stance on repurchase requests for loans with curable defects. In addition, HUD has yet to complete its reviews of some vintage FHA loan production, an area notorious for defects. All of this may spell trouble for lenders that are already financially strapped due to declining volumes.”
Findings for the Q4 2022 ACES Mortgage QC Industry Trends Report are based on post-closing quality control data derived from the ACES Quality Management and Control® benchmarking system and incorporate data from prior quarters and/or calendar years, where applicable. All reviews and defect data evaluated for the report were based on loan audits selected by lenders for full file reviews.
“Loan defects are one of the greatest sources of financial risk to lenders in today’s tight origination market,” said ACES CEO Trevor Gauthier. “The best defense against this kind of threat is a robust QC auditing platform like ACES, which helps lenders retain the value of their loan production by identifying the point of origin for loan defects within the manufacturing process and uncovering defect trends to help resolve these issues before they become the impetus for a repurchase request or sale on the scratch-and-dent market.”
The Mortgage QC Industry Trends Reports are available for download, free of charge, at https://www.acesquality.com/resources/reports.
ACES executives will analyze the Q4 2022 ACES Mortgage QC Industry Trends Report findings and offer insights into what lenders can expect in future quarters during a webinar titled, “QC Trends and Industry Insights” as part of its ongoing QC NOW Web Series.
Visit the ACES Webinar page for upcoming registration details: https://www.acesquality.com/resources/webinars.
About ACES Quality Management:
ACES Quality Management is the leading provider of enterprise quality management and control software for the financial services industry. The nation’s most prominent lenders, servicers and financial institutions rely on ACES Quality Management & Control® Software to improve audit throughput and quality while controlling costs, including:
* 60% of the top 50 independent mortgage lenders;
* 8 of the top 10 loan servicers;
* 11 of the top 30 banks; and
* 3 of the top 5 credit unions in the United States.
Unlike other quality control platforms, only ACES delivers Flexible Audit Technology®, which gives independent mortgage lenders and financial institutions the ability to easily manage and customize ACES to meet their business needs without having to rely on IT or other outside resources. Using a customer-centric approach, ACES clients get responsive support and access to our experts to maximize their investment. For more information, visit www.acesquality.com or call 1-800-858-1598.
Learn More: https://www.acesquality.com/
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