Notable findings include:
- The overall critical defect increased 0.08% to 1.95%, a change of 4% from the prior quarter, as lenders transitioned to a purchase-heavy lending environment.
- Income/Employment defects declined in overall share but remained the No. 1 most frequently cited issue, even after pandemic-related verification issues had subsided.
- Appraisal-related defects rose in Q4 2021 after experiencing minimal levels throughout the last refinance cycle.
- Purchase review share was 20 points higher than refinances.
- Conventional lending share is now 8 points below the pandemic peak amid a mini-resurgence in FHA lending.
“While the overall defect rate rose slightly in Q4 2021, defect rates have improved in totality when comparing 2021 to 2020,” said ACES Executive Vice President Nick Volpe. “Given the uptick in Q4 and the persistent issues we’re still seeing in the Income/Employment category, lenders should focus their efforts on shoring up this component of their underwriting process.”
