Refi activity also fueled decrease in FHA loan defects from Q2 2019
(DENVER, Colo.) — NEWS: ACES Risk Management (ARMCO), the leading provider of enterprise financial risk mitigation solutions, announced the release of the quarterly ARMCO Mortgage QC Trends Report. The latest report covers third quarter (Q3) 2019 and provides loan quality findings for mortgages reviewed by ACES Audit Technology™.
In Q3 2019, the overall critical defect rate reached 1.56%, representing a 9% decrease from the previous quarter and resulting in the lowest defect rate since Q4 2016. This also represents a 19% improvement from the most recent critical defect rate peak, which occurred in Q4 2018.
“The driving force behind Q3’s strong critical defect rate is the increase in refinances, which accounted for 40% of the overall volume of loans reviewed this quarter. Given the current rate environment and overall mortgage market conditions, ARMCO’s outlook for both the critical defect rate and the market as a whole remains incredibly strong,” said ARMCO Executive Vice President, Nick Volpe.
The report’s noteworthy findings include:
* The percentage of government loans reviewed in Q3 fell as the interest rate environment drove more conventional refinances, resulting in a 10% improvement on FHA loan defects compared to the previous quarter.
* Defect performance for purchase loans also improved, with defect categories related to core underwriting and qualification showing improvements over Q2 2019.
* Increase in Property/Appraisal defects driven by lasting effects of Hurricane Dorian, Hurricane Humberto and the multiple wildfires in Northern and Southern California.
“While refinance transactions generally result in fewer defects, volume spikes can often have the opposite impact on loan quality,” said ARMCO President, Phil McCall. “Leveraging technology helps lenders better manage mortgage volume peaks and valleys while always keeping the focus on loan quality.”
ARMCO’s Mortgage QC Industry Trends Reports are based on nationwide post-closing quality control loan data from over 90,000 unique 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. ARMCO Mortgage QC Industry Trends Reports are available for download, free of charge, at https://www.armco.us/learn/reports.
Over half of the top 25 mortgage lenders and 33% of the top 150 lenders and servicers combined choose ARMCO. ARMCO’s product line includes loan quality enterprise software, services, data and analytics. Its flagship product, ACES Audit Technology™, has set the bar for user definability in its category. It is used at virtually every point in the mortgage lifecycle, as well as for a wide range of risk-prone business operations outside traditional mortgage origination and servicing.
ARMCO’s consultative approach to customer relationships leverages 25 years of mortgage risk intel, assuring that its clients are using the most effective risk mitigation strategies, and are using the fastest, most reliable, most efficient means for preventing risk-related loss. ARMCO distributes the ARMCO Mortgage QC Industry Trends Report, a free quarterly analysis of industry-wide mortgage loan quality. For more information, visit www.armco.us or call 1-800-858-1598.
Related link: https://www.armco.us/
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