The quality of residential loans funded this year is slipping compared to 2009, according to a new report from Quality Mortgage Services LLC, a third party vendor that works on compliance and other issues.
QMS says the number of loans whose quality can be characterized as "excellent" dropped from 30% in 2009 to 28% in 2010. Loans that rank as "good" dropped to 57% from 58%. (Ratios rounded by National Mortgage News.)
The most common loan defect the company found in its post closing quality control audits is errors on the initial Truth-in-Lending/Good Faith Estimate forms. These increased to 19% from 12% last year.
QMS also found a significant increase in automated underwriting discrepancies. This problem includes data in the loan file not matching what was entered into the automated underwriting system. However, the company said, it is hard to tell right now whether these discrepancies are carelessness or the manipulation or deliberate omission of the data entered into the AUS to get a decision.
At the other end of the scale, the number of "fair" loans (which means they might be challenged in a repurchase) increased to 14% from 10% in 2009. The number of loans where fraud for housing was found in a post closing audit increased to 2% from 1% in 2009, said the Franklin, Tenn.-based company.
QMS has been supplying mortgage quality control and compliance solutions since 1992.
