ACES Releases Latest QC Trends Report
Why This Matters: To maintain a strong quality control policy, lenders are required to monitor and appropriately adjust their own target defect rates. Industry benchmarks can be a helpful contributor to that review process and this article provides insight for such a comparison.
ACES, Spillane Consulting Associates’ premier quality control software, has recently announced their findings regarding the critical defect rate of post-closing reviews conducted in the last quarter of 2023. And the results shed a positive light on what’s been such a challenging market. Q4 of 2023 marked the 5th quarter in a row of a declining critical defect rate, ending at 1.53%.
ACES utilizes post-closing QC data derived from the large pool of mortgage lenders and providers that use the ACES software. It is based on tens of thousands of unique records, giving a broad perspective that acts as a great benchmarking tool for your own analysis.
Although great news to see the overall defect rate trending downward, defects still do exist, and it is helpful to look deeper at what main categories contribute to the overall defects. In the chart below, we see that nearly 37% of the defects detected were in the Income/Employment category. Taking second place with over 17% was a defect related to Assets, and a close third with nearly 13% of defects were due to Borrower and Mortgage Eligibility.
Lenders who take this data one step further and dig into the root cause are more apt to see similar downward trends in their defect rate, determining whether the defects indicate a need to review the overall origination workflow, or conduct additional underwriter training, or better utilize useful tools for analyzing unique credit scenarios, for example.
The most profound takeaway is that despite the many challenges lenders are facing in the current market, they continue to prioritize their commitment to loan quality. To discuss your own institution’s critical defect rate or how the team at SCA can assist in your loan quality process, contact our Director, Bill Dolan at wdolan@scapartnering.com or by phone at (617) 694-2617.
Source: ACES | Q4 2023 ACES Mortgage QC Industry Trends (acesquality.com)
