Mortgage loans continue to show signs of improvement in the first half of 2013 compared to a year ago, according to data pulled from Qualified Mortgage Services’ Mortgage Analysis Review Software post-closing audits.
The data shows a decrease in repurchase potential from 6.1% in 2012 to 3.4% this year, as well a year-over-year drop in misrepresentations from 0.26% to 0.15%.
The MARS data also found improvements in loan quality with a decline of average credit scores for loans tested for eligibility from 748 a year ago to 739 now.
Additionally, back ratios favor progress for borrowers too, with 23/33 in 2012 to 23/35 for the first half of 2013.
Meanwhile, there was a jump in loan eligibility on a yearly basis, now at 96.4% compared to 96.7% a year earlier.
Overall, the results of this data reflect a favorable shift towards borrowers.
“There may be a shift in risk and eligibility validations as the market moves into a dominant purchase and first time homebuyer market,” said
For example, quality control audits for first time homebuyers are challenging because lenders need to show a consistency in income for at least two years. Also, this buyer usually requires additional sourcing in the form of a “gift,” which will then increase high ratios, Duncan says.
But with the higher interest rates and the refinance market going away, Duncan notes that it appears the market will return to a more “government mortgage” type of program in which pre-funding programs will be tested and underwriters can expect to become familiar with more manual underwriting procedures as loans may be more complex.
