DENVER, Colo., March 23, 2023—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 Industry Trends Report covering the third quarter (Q3) of 2022. The latest report analyzes post-closing quality control data derived from ACES Quality Management & Control® software.
Notable findings from the Q3 2022 report include the following:
- The overall critical defect rate increased 20.5% over Q2 2022, ending the quarter at 2.47% – a report high.
- Of the four major underwriting categories (Assets, Credit, Income/Employment and Liabilities), three saw moderate to significant increases in Q2 2022. Income/Employment remained the leading category of defects reported, despite continuing its multi-quarter trend of decline.
- A sub-category analysis of the Assets and Income/Employment categories uncovered troubling defect trends related to eligibility.
- Appraisal defects declined once again, now reflecting a multi-quarter trend.
- Purchase share dominated in Q3 2022, as expected given market conditions, while review share for FHA, USDA and VA loans increased.
- In a reversal of last quarter’s findings, FHA defect share saw a moderate increase in Q3 2022, along with a slight defect increase in conventional loans. USDA and VA loan defects improved significantly last quarter.
“The overarching theme for this quarter’s report is the effect of sharp declines in loan volume and interest rate volatility on lenders’ operations. With purchase originations down nearly 20% quarter-over-quarter and close to 50% year-over-year, lenders are fighting to keep every potential piece of business that comes their way and, perhaps, becoming more aggressive in their borrower qualifications,” said ACES Executive Vice President Nick Volpe. “Riding the line on eligibility provides little margin for error. Thus, lenders must continue emphasizing loan quality to ensure salability and long-term asset performance.”
Findings for the Q3 2022 ACES Mortgage QC Industry Trends Report are based on post-closing quality control data derived from the ACES Quality Management and Control® benchmarking system and incorporate 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.[LN1] [RC2]
“In our last report, we mentioned employment and loan documentation as areas of concern. As layoffs have continued since Q2 2022, we’re seeing the ripple effects of interest rate volatility and changing market conditions surface in other areas of the loan manufacturing process, particularly in eligibility,” said ACES CEO Trevor Gauthier. “With ACES, lenders can not only identify these immediate areas of concern but also view their QC findings within a historical context to pinpoint trends and execute immediate corrective actions to protect the integrity of their origination pipeline.”
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 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:
- 60% of the top 50 independent mortgage lenders;
- 8 of the top 10 loan servicers;
- 11 of the top 30 banks; and
- 2 of the top 3 credit unions in the United States.
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.
Media Contact
Lindsey Neal | DepthPR for ACES Quality Management | (404) 549-9282 | lindsey@depthpr.com