POMPANO BEACH, Fla. — ACES Risk Management (ARMCO), the leading provider of financial quality control and compliance software, announced it has released its ARMCO Mortgage QC Industry Trends report, covering the first quarter of 2016. Using the Fannie Mae loan defect taxonomy, the report details the analysis of post-closing quality control data from loan files and findings captured by the ACES Analytics benchmarking system.
The overall industry critical defect rate trended downward for most of 2015, dropping to 0.77 percent in Q3. However, the defect rate began to climb in Q4 2015, and this trend has continued, with the critical defect rate increasing to 1.92 percent in Q1 2016 which corresponds to a rise in the number of Legal/Regulatory/Compliance defects. In 2015, Legal/Regulatory/Compliance defects comprised 25.9 percent of all defect reported. In Q1 2016, they accounted for 50 percent, which represents a 93 percent increase.
“The implementation of TRID in the fourth quarter of 2015 is directly responsible for both the increase in compliance-related defects and the critical defect rate for the entire industry, as defect rates for all other categories continue to decrease,” said Phil McCall, COO for ARMCO. “Prior to Q4 2015, lenders were doing an excellent job of driving down critical defect rates, and once the industry begins to implement corrective action plans for TRID-related defects, we expect to see the overall and compliance critical defect rates to trend downward once more.”
According to the report, the industry has reduced its overall defect rate in both the Loan Package Documentation and Property-Appraisal categories, which represent the second and third most frequently reported defects in Q1 2016. Defects in the Loan Package Documentation category, which was the No.1 category for 2015, decreased from 35.3 percent in 2015 to 26.4 percent in Q1 2016.
“The significant decrease in Loan Package Documentation defects reflects a concerted effort by lenders to address this point of concern in their loan production strategy,” said Avi Naider, CEO for ARMCO. “The GSEs have conveyed to the industry that missing documents are a significant loan quality issue that needs to be resolved, and the decrease in defects in this category is evidence that lenders are taking this to heart and implementing corrective action plans to ensure all required docs are included in the final loan package.”
To view the full report, visit http://www.armco.us/knowledge/mortgage-qc-industry-report-2016-q1.
About ARMCO:
ARMCO – ACES Risk Management delivers web-based audit technology solutions, as well as powerful data and analytics, to the nation’s top mortgage lenders, servicers, investors and outsourcing professionals. A trusted partner devoted to client relationships, ARMCO offers best-in-class quality control and compliance software that provides U.S. banks, mortgage companies and service providers the technology and data needed to support loan integrity, meet regulatory requirements, reduce risk and drive positive business decisions. ARMCO’s flagship product, ACES Web Audit Technology(tm), is available at any point in the mortgage loan lifecycle, to any size lender, and is user-definable. ACES Web standardizes audit requirements, ties pre-funding reviews to post-closing quality control audits, enables seamless trend analysis, identifies credit, compliance and process deficiencies and helps create manageable action plans.
For more information, visit http://www.armco.us/ or call 1-800-858-1598.
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