Critical Loan Defect Rate Drops

ACES Risk Management, Pompano Beach, Fla., said its quarterly Mortgage QC Trends Report showed critical loan defect rates fell by 6 percent in third quarter 2017, the first such drop for that calendar year.

The report, which relays loan quality findings for mortgages reviewed by ACES Audit Technology between July 1-September 30, 2017, also showed the percentage of purchase transactions declined in in the third quarter. Purchase transactions and FHA loans accounted for a disproportionately higher number of critical defects in Q3 2017.

“As the percentage of refis increased in the third quarter of 2017, we saw a drop in critical defect rates,” said Phil McCall, president of ARMCO. “That said, purchases still comprise the majority of mortgages originated, so critical defect activity still aligns with what you’d see in a purchase-driven market. Lenders need to be mindful of the risks inherent with purchase transactions and take precautions, regardless of fluctuations in purchase/refi market share.”

The report is available at MBA Insights will present a slideshow version of this report beginning in its May 1 edition. To read the current issue of MBA Insights, click