What Mortgage Lenders Need to Know About the Vendor Risk in 2026
Amanda Farnham is third-party risk management intelligence expert at Ncontracts, Nashville.
Mortgage lenders operate through a dense web of third-party relationships. Loan origination systems, point-of-sale platforms, appraisal management companies, title and settlement providers, credit reporting agencies, flood determination vendors, document preparation services, and servicing technology partners are all deeply embedded in the daily mechanics of mortgage production.
Each of those relationships carries risk–and according to Ncontracts’ 2026 State of Third-Party Risk Management Survey, the programs most lenders rely on to manage that risk are stretched well past their capacity.
When Vendor Counts Outpace Oversight Capacity
The challenge facing most TPRM programs isn’t a lack of commitment, it is a fundamental mismatch between the scale of vendor oversight required and the resources available to deliver it. The survey found that 63% of TPRM programs operate with just one or two dedicated employees, while more than half of all surveyed organizations manage 300 or more vendors.
That ratio routinely places a single professional in charge of more than 100 vendor relationships, each requiring initial due diligence, periodic reassessment, contract oversight, and incident response. For mortgage lenders, whose vendor ecosystems tend to be both large and highly regulated, understaffed oversight programs create direct, measurable exposure.
The budget picture makes it worse. Over two-thirds (64%) of respondents expect their TPRM budgets to remain flat in the coming year, even as AI adoption, cybersecurity complexity, and growing vendor counts pile on. Something has to give, and for most programs, what gives is depth of oversight rather than breadth.
Artificial Intelligence Is Embedded in Mortgage Vendor Systems, Yet Almost No One Can Account for It
Artificial intelligence tied with cybersecurity as the top concern among TPRM professionals in the 2026 survey. For mortgage lenders, that’s not a surprise.
AI-driven tools are embedded in automated underwriting support, income and asset verification, fraud detection, appraisal review, and customer communication platforms–all areas where fair lending compliance, explainability requirements, and data integrity are non-negotiable regulatory expectations.
The visibility gap is significant and difficult to ignore. Most organizations (72%) are only partially aware of which vendors use AI in their products and services. Another 16% hadn’t assessed vendor AI usage at all. Not a single surveyed organization felt extremely confident in its ability to manage AI-related vendor risk.
That’s an important compliance issue for mortgage lenders. When a vendor’s AI model contributes to a credit or pricing outcome that a borrower later challenges, the lender’s ability to explain and defend that outcome depends entirely on adequate oversight of the vendor’s AI practices. Lack of AI explainability is no defense.
A good starting point: require vendors to disclose where AI is used in their products, what data it’s trained on, and how decisions can be explained–then build those questions into your standard due diligence process.
Cybersecurity Risk Doesn’t Stop at Your Organization’s Edge
About 52% of organizations experienced some form of a third-party cybersecurity incident in the last 12 months, up from 46% the year before. Severe incidents remain relatively uncommon, but low-impact incidents are rising–and their cumulative effect on productivity is significant. Respondents cited time spent investigating issues and restoring services as the most common impact, ahead of reputational damage and monetary cost.
For mortgage servicers and originators, a third-party cybersecurity event can trigger notification obligations, affect borrower data, disrupt closing timelines, or compromise the integrity of loan files–all of which carry both regulatory and operational consequences.
Lenders need to build vendor incident response protocols and contractual notification requirements before something happens, not after.
Technology Investment Pays for Itself in Exam Outcomes
One of the survey’s most actionable findings is the gap in regulatory exam outcomes between organizations using dedicated TPRM software and those still on spreadsheets.
Manual process users were 82% more likely to receive exam or audit findings requiring improvements than software users. The explanation is straightforward: when examiners and auditors can’t find documented workflows, consistent processes, and auditable trails of vendor oversight activity, they flag deficiencies — regardless of whether the underlying risk management work was actually done. Spreadsheets don’t produce the structured, retrievable documentation that satisfies examination standards. The data shows those consequences clearly.
The survey also found that 23% of TPRM software users are actively developing new program metrics, compared to 0% of spreadsheet users–a gap that reflects not just tool capability but organizational mindset.
Purpose-built platforms push organizations toward measurement and continuous improvement. Manual processes keep them focused on staying current with basic compliance obligations.
Leadership Is Pushing for Better Vendor Oversight, Not Just Regulators
The governance picture has shifted. Nearly three-quarters of surveyed organizations reported pressure to improve their TPRM programs–and management and board pressure accounted for 38% of that demand, slightly ahead of regulatory pressure at 31%.
Lenders that experienced significant vendor-related disruptions in recent years have seen how quickly third-party failures become board-level conversations. That shift creates an opening for lenders to reframe TPRM as a strategic function, not a back-office compliance obligation. Survey data on program maturity supports that case. Among the most advanced programs, 26% are recognized as delivering high value across the organization, and fewer than one in ten still view the function as a pure compliance exercise compared to more than two-thirds of the least mature programs.
Program maturity comes down to deliberate decisions: how the function is structured, which technology platforms support it, and how performance gets measured and reported to leadership. Documenting those decisions and revisiting them annually ensures you’re prepared when examiners and board members start asking questions.
For mortgage lenders navigating a complex vendor ecosystem while managing margin pressure and regulatory scrutiny, those decisions have never been more consequential.
(Views expressed in this article do not necessarily reflect policies of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes submissions from member firms. Inquiries can be sent to Editor Michael Tucker or Editorial Manager Anneliese Mahoney.)
