Defects decline as mortgage lenders self-correct

Source: Housing Wire — 

Mortgage lenders have been making strides to right their wrongs, with critical defects falling to a rate of 2.01% in the first quarter of 2021, according to ACES Quality Management’s report published this week.

This marks a notable improvement from the third quarter of 2020, when the critical rate rose to 2.34%, buoyed by increased volume, COVID-19 related compliance changes, and continued high unemployment numbers, the analytics vendor said.

Nick Volpe, executive vice president of ACES, said that these results mark a “second consecutive quarter of decline in the critical defect rate.” The previous quarter saw the rate of critical defects drop to 2.09%.

“Lenders and servicers should still proceed with caution, as declines in gain-on-sale, the conclusion of the eviction moratorium, persistent inflation and a potential default wave as forbearances come to an end all have the potential to trigger industry disruption,” Volpe said.

Defect categories that need some attention from mortgage lenders, said ACES, is the income/employment category, as well as some of the core underwriting/ qualification categories.