25% increase in defects marks highest rate observed since report’s 2016 inception
(DENVER, Colo.) — NEWS: 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 Trends Report covering the third quarter (Q3) of 2020. The latest report provides an analysis of post-closing quality control data derived from ACES Quality Management & Control Software™.
Notable findings from the Q3 2020 report include:
* The overall critical defect rate of 2.34% represents a marked increase from prior quarters and is the highest observed since ACES began publishing the QC Trends Report in 2016.
* Income/Employment defect share fell, showing positive signs, while manufacturing-related defects grew.
* Record lending volume combined with summer home buying led to an increase in overall purchase share from the prior quarter.
* Conventional loans had a strong market share but slipped in terms of quality in Q3.
* Early Payment Defaults (EPDs) declined in Q3, providing reason to be cautiously optimistic.
“Without a doubt, Q3 2020’s critical defect rate was the highest we’ve seen since ACES began publishing the QC Trends Report in 2016, and while there are multiple factors that attributed to the 25% increase in critical defects, the majority of them were COVID-related,” said ACES Executive Vice President Nick Volpe. “Given that many of these factors are still at play, we expect to see continued volatility in defect rates for at least several more quarters. However, we did see a decline in EPDs in Q4 2020 to just 110% of their pre-pandemic levels, which provides a measure of optimism after hitting a 200% increase in Q3.”
Findings for the Q3 2020 ACES Mortgage QC Industry Trends Report are based on post-closing quality control data from approximately 100,000 unique loans and are categorized using the Fannie Mae loan defect taxonomy and incorporates 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.
“Despite record interest rate lows, there was still plenty of volatility in the mortgage markets in 2020, as evidenced by the data from Q3. With the pandemic’s end not quite yet in sight, lenders need to remain vigilant of the trends impacting their loan quality,” said ACES CEO Trevor Gauthier. “More than ever, the transparency ACES provides lenders into their loan performance as compared to their peers delivers valuable insights that can help these institutions not only identify where they are currently falling short in terms of loan quality, but also highlight areas to watch in the future based on industry trends. That ability to be proactive in mitigating defects and risk cannot be overstated, especially in the midst of market volatility and high volumes.”
ACES executives will analyze the findings from the Q3 2020 ACES Mortgage QC Industry Trends Report and offer insights into what lenders can expect in future quarters during a webinar titled, “Insights into Mortgage QC Trends” as part of its on-going QC NOW Web Series. Visit the QC Now website for upcoming registration details.
Mortgage QC Industry Trends Reports are available for download, free of charge, at https://www.acesquality.com/resources/reports.
About ACES Quality Management
ACES Quality Management, formerly known as ACES Risk Management (ARMCO), 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:
* 3 of the top 5 and more than 50% of the top 50 independent mortgage lenders;
* 7 of the top 10 loan servicers;
* 11 of the top 30 banks; and
* 1 of the top 3 credit unions in the USA.
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.
Related link: https://www.acesquality.com/
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