The quarter recorded the third straight increase in the critical defect rate
The rate of critical mortgage loan defects increased in the second quarter of 2017 as the market continued to be dominated by purchase loans, according to the Mortgage QC Trends Report released by ACES Risk Management (ARMCO).
The critical defect rate reached 1.76% in the second quarter, up 9% over the 1.61% critical defect rate recorded in the first quarter of 2017. The second-quarter marks the third straight quarterly increase.
ARMCO also found that borrower and mortgage eligibility was the top critical defect category during the quarter. Additionally, purchase loans accounted for a disproportionately high number of critical defects.
ARMCO President Phil McCall said the trend of critical defect activity aligns with their expectations given the purchase-driven market. McCall also said that lenders who have not addressed related loan quality issues should consider doing so in case purchases continue to drive the market.
“Investors are tracking these trends as well, and could make adjustments to protect themselves from what they see as potentially damaging market trends—lenders need to be aware of that,” McCall said. “Adjusting QC efforts in the short term can help lenders react to guideline changes with ease and fluidity.”
The ARMCO Mortgage QC Trends Report is based on loan quality findings for mortgages reviewed by the company’s financial quality control and compliance ACES Audit Technology software between April 1 and June 30, 2017.
Related stories:
Shift to purchase transactions pushes critical defect rate increase in Q1
Purchase mortgages for new homes increase
The critical defect rate reached 1.76% in the second quarter, up 9% over the 1.61% critical defect rate recorded in the first quarter of 2017. The second-quarter marks the third straight quarterly increase.
ARMCO also found that borrower and mortgage eligibility was the top critical defect category during the quarter. Additionally, purchase loans accounted for a disproportionately high number of critical defects.
ARMCO President Phil McCall said the trend of critical defect activity aligns with their expectations given the purchase-driven market. McCall also said that lenders who have not addressed related loan quality issues should consider doing so in case purchases continue to drive the market.
“Investors are tracking these trends as well, and could make adjustments to protect themselves from what they see as potentially damaging market trends—lenders need to be aware of that,” McCall said. “Adjusting QC efforts in the short term can help lenders react to guideline changes with ease and fluidity.”
The ARMCO Mortgage QC Trends Report is based on loan quality findings for mortgages reviewed by the company’s financial quality control and compliance ACES Audit Technology software between April 1 and June 30, 2017.
Related stories:
Shift to purchase transactions pushes critical defect rate increase in Q1
Purchase mortgages for new homes increase
