In Q4 2024, the mortgage industry saw a significant 23.2% reduction in the critical defect rate, achieving 1.16%. Improvements were noted in three major underwriting categories, including assets and income/employment. However, defects in legal/regulatory/compliance and product eligibility categories increased, resulting in the former category becoming the leading defect area. Despite challenges, lenders made progress in enhancing loan quality throughout 2024, showcasing resilience with one of the lowest defect rates on record. Continued monitoring of compliance categories is essential for maintaining quality control amidst these fluctuations.
The Q4 2024 critical defect rate dropped 23.2% to 1.16%, signaling significant improvement in mortgage underwriting trends despite increases in legal/regulatory/compliance defects.
Lenders achieved notable progress in quality control in 2024, ending the year with one of the lowest quarterly defect rates, yet challenges remain in compliance categories.
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