Latest ARMCO QC Trends Report Draws Correlation Between Lenders’ Profitability and Adaptability to Market

In Q2 2019, the critical defect rate improved while FHA loan quality decreased

Published December 19, 2019

Denver, CO., Dec. 19, 2019 ACES Risk Management (ARMCO), the leading provider of enterprise financial risk management solutions, announced the release of the quarterly ARMCO Mortgage QC Trends Report. The latest report covers second quarter (Q2) 2019 and provides loan quality findings for mortgages reviewed by ACES Audit Technology™.

In Q2 2019, the overall critical defect rate declined for two consecutive quarters for the first time since Q3 2016, falling 5.5% to 1.72%. The industry’s two-quarter decline in critical defects coincides with two consecutive quarters of strong but steady loan volume and a three-year high in lender profitability, according to the most recent Quarterly Performance Report issued by the Mortgage Bankers Association (MBA). In October 2019, the MBA Economic Forecast predicted 2019 origination volume to reach $2.06 trillion, its highest level since 2007.

The report’s noteworthy findings include:

According to Nick Volpe, chief strategy officer at ARMCO, volume fluctuations like those seen in the quarters prior to Q1 2019 and Q2 2019 cause challenges for lenders, which often respond to sudden spikes and dips by adjusting their labor forces through layoffs, downsizing, re-allocating staff and hiring.

“These changes upset the status quo and usually result in more defects, because staff instability increases errors and oversights,” he said. “When lenders adapt, usually when the market steadies, defects decrease. It is therefore safe to say that when lenders use technology that improves their scalability, they increase profitability faster than those who rely on manual processes.”

“The positive benefits of technology like ACES goes way beyond the immediate boost to speed and accuracy,” said Phil McCall, president of ARMCO. “As the data reveals, they have a real impact on the speed to which lenders can return to heightened profitability. It’s extremely satisfying to know that we’re enabling our customers to not just reduce costs, but also to proactively increase profits.”

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


Over half of the top 20 mortgage lenders in the U.S. choose ARMCO as their provider of risk management software. 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 or call 1-800-858-1598.


Jeri Yoshida | Yosh Communications | | 310 651 0057

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