Pristine.
That's one of many positive words that have been used to describe the quality of the mortgage loans originated during the second half of 2012 through the first half of 2013.
According to Quality Mortgage Services, citing data derived from its Mortgage Analysis Review Software used for post-closing audits, the quality of mortgage underwriting continues to improve.
According to the firm's latest data, loan eligibility shifted from 96.66% in the second half of 2012 to 96.44% in the first half of 2013.
In addition, repurchase potential, or the risk of the ‘dreaded buyback,’ decreased from 6.08% in 2012 to 3.40% this year.
The report also notes a decline in misrepresentation from 0.26% in 2012 to 0.15% in 2013.
The improvement in loan quality comes despite a drop of average credit scores for loans tested for eligibility from 748 in 2012 to 739 this year.
Back ratios favor improvement for borrowers with 23/33 in 2012 to 23/35 for 2013, the firm notes.
Although the data reflect a favorable shift toward borrowers, Tommy A. Duncan, CEO of Quality Mortgage Services, warns ‘There may be a shift in risk and eligibility validations as the market moves into a dominant purchase and first-time home buyer market.
‘Although this data helps us predict shifts in the industry, quality control programs should continue to validate income, employment and complex tax returns,’ Duncan adds.
The firm notes that quality control audits for first time home buyers are challenging due to the fact that 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.
