ACES Risk Management (ARMCO) announced the release of the quarterly ARMCO Mortgage QC Trends Report. The latest report provides loan quality findings for mortgages reviewed by ACES Audit Technology during the first quarter (Q1) of 2018, ARMCO announced in its release.
The report’s noteworthy findings include in Q1 2018, the critical defect rate increased from the previous quarter’s 1.68 percent to 1.72 percent, while with the previous quarter, in Q1 2018, the majority of critical defects were attributed to the Income/Employment category.
The quarter saw a 25 percent increase in the number of defects attributed to the Loan Package Documentation category — these defects are often associated with downsizing and understaffing. Additionally, the number of defects attributed to the Borrower and Mortgage Eligibility category dropped to 6.57 percent, roughly 50 percent of the previous quarter’s rate of 12.24 percent, the report stated.
Critical defects related to core underwriting and eligibility issues continued to be the most frequently occurring — which is typical in purchase-driven markets.
“The distribution of critical defects for the first quarter of this year differed significantly from those we saw during the last quarter of 2017,” ARMCO President Phil McCall said in the release. “What the report reveals is consistent purchase-dominant contracting markets. One of the newest trends is a spike in defects associated with loan package documentation. This is often a result of lender downsizing and staff consolidation, which occurs when declining loan volume becomes a trend — as it did in the beginning of this year.”
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. ARMCO issues a one-year analysis for the calendar year with each fourth quarter Mortgage QC Industry Trends Report.
“This quarter’s findings show how current data helps lenders protect profitability,” McCall said. “If lenders have had layoffs, or if they’re anticipating downsizing, they should know where and how it will impact their lending ability. Gaining access to this type of data helps eliminate the number one cost associated with downsizing.”
ARMCO is the leading provider of enterprise financial risk management solutions.