"We've gone through a couple of tough years within the lending industry, and with it, we saw lots of reductions in force, cutting back on staff, etc. In 2025, we started to see stability within the staffing on the QC side. With originations, I think everything has been filtered down to the lowest cost possible to get these originations through."
"You're going to have changes quarter to quarter of what's happening within the market, within your industry, and where you're adjusting it. Sometimes we get a little bit of a rate drop, and suddenly you have a little refi surge. So there's a big boost of business coming there. And with it, you tend to find that those surges will create a few more defect problems."
"Defects mix is also really a big part of the story. We've had income and employment issues being in the lead, but there are other categories that start to surge a little bit. There's eligibility, there's collateral, regulatory issues and the like. I think the headline of the whole thing is, though relatively low, these defects, types and concentrations can really change rather quickly."
The lending industry experienced staffing cuts followed by QC staffing stabilization in 2025. Originations have been processed at the lowest possible cost, leaving lenders vulnerable to quality issues during volume surges. Rate drops can trigger refinance surges that temporarily increase defect occurrences, which typically settle once volumes ease without further layoffs. Defect mix is dynamic: income and employment defects lead, while eligibility, collateral, and regulatory issues can surge. Defect types and concentrations can shift rapidly despite overall low defect rates. Delivering closed loans to the secondary market carries ongoing buyback exposure from GSEs.
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