ACES Q1 2026 Mortgage QC Industry Trends Report shows critical defect rate reverses course as compliance defects reach record share

- Underwriting quality improves even as compliance and documentation findings push the overall defect rate higher -

DENVER, Colo., Aug. 18, 2026 (SEND2PRESS NEWSWIRE) — ACES Quality Management® (ACES), the leading provider of enterprise quality management and control software for the financial services industry, announced the release of its quarterly ACES Mortgage QC Industry Trends Report covering Q1 of 2026. The report analyzes post-closing quality control data derived from the ACES Quality Management & Control® software.

Key findings from the Q1 2026 ACES Mortgage QC Industry Trends Report include:

• The overall critical defect rate rose 23.9%, increasing from 1.38% in Q4 2025 to 1.71% in Q1 2026, and climbed 30.5% from 1.31% in Q1 2025.
• Legal/Regulatory/Compliance defects rose 5.5%, increasing from 24.66% to 26.02%. It was the category’s fourth consecutive quarterly increase, its highest share since Q1 2021 and the second straight quarter as the leading defect category.
• Income/Employment defects declined 6.7%, easing from 21.52% to 20.07% and holding the No. 2 spot for a second consecutive quarter. It was the first time in the last five years that the category had ranked second in back-to-back quarters.
• Asset defects fell 31.7%, dropping from 15.25% to 10.41%. It was the largest single-category improvement of the quarter and ended three consecutive quarterly increases.
• Credit defects eased by 3.4 percent from 5.38% to 5.2%, and Liabilities defects were essentially unchanged, moving from 10.76% to 10.78%.
• Refinance review share rose from 27.37% to 32.05%, a fourth consecutive quarterly increase and the highest level since Q1 2022, while refinance defect share climbed from 36.84% to 38.57%.
• VA defect share fell 20.6%, from 12.32% to 9.78%, the strongest product-level result of the quarter. FHA defect share remained essentially flat, from 31.96% to 32.27%, continuing to run well above FHA’s 24.46% review share.

“Q1’s swing back above 1.7% is a reminder that mortgage quality doesn’t move in a straight line, especially in a rate environment as volatile as this one,” said Nick Volpe, executive vice president of ACES Quality Management. “The dip below 6% in February pulled a wave of refinance activity through lenders’ pipelines almost overnight, and this quarter’s data shows the eligibility and compliance friction that came with it. For lender, success in 2026 will likely depend on their ability to flex their QC capacity as quickly as the rate environment is shifting in the current market.”

Findings for the Q1 2026 ACES Mortgage QC Industry Trends Report are based on post-closing quality control data derived from the ACES Quality Management and Control® benchmarking system and incorporate data from prior quarters, where applicable. All reviews and defect data evaluated for the report were based on loan audits selected by lenders for full file reviews. The Q1 2026 report and prior editions are available for free download at https://www.acesquality.com/resources/reports.

About ACES Quality Management

ACES Quality Management is the leading provider of enterprise quality management and control software for the financial services industry. The nation’s most prominent lenders, servicers and financial institutions rely on ACES Quality Management & Control Software to improve audit throughput and quality while controlling costs, including:

• Over 70% of the top 20 independent mortgage lenders;
• 7 of the top 10 loan servicers;
• 14 of the top 30 banks; and
• 7 of the top 15 credit unions in the United States.

ACES also supports multiple state housing authorities and mortgage insurers, a government-sponsored enterprise (GSE) and dozens of third-party QC service providers that collectively serve hundreds of financial institutions.

Unlike other quality control platforms, ACES Flexible Audit Technology® enables independent mortgage lenders and financial institutions to easily manage and customize the system to their specific needs without relying on IT or outside resources. With ACES’ AI-powered capabilities, audit teams can translate complexity into clear insights and accelerate performance.

Using a customer-centric approach, ACES clients get responsive support and access to our experts to maximize their investment. For more information, visit https://www.acesquality.com/ or call 1-800-858-1598.

NEWS SOURCE: ACES Quality Management

Keywords: Mortgage, Mortgage QC Industry Trends Report, ACES Quality Management, enterprise quality management and control software, DENVER, Colo.

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