Real Estate
Home›Real Estate›Mortgages›Mortgage critical defect rate rises to 1.71% in Q1 2026
Mortgage critical defect rate rises to 1.71% in Q1 2026
Legal, regulatory and compliance issues made up 26.0% of defects in Q1 2026, and refinances accounted for 32.1% of reviews.
HousingWire reports ACES Quality Management’s quarterly Mortgage QC Industry Trends Report found the mortgage industry critical defect rate rose to 1.71% in Q1 2026, from 1.38% in Q4 2025. The rate was also higher than the 1.31% level in Q1 2025.
The report attributed the rise in critical defects mainly to a larger share of legal, regulatory and compliance problems, which accounted for 26.02% of all defects in Q1 2026, up from 24.66% in the prior quarter. That category marked the fourth consecutive quarterly increase, reaching its highest share since Q1 2021, while income and employment defects fell to 20.07% from 21.52%.
ACES also reported a continued shift toward refinance activity. The share of reviews involving refinances increased to 32.05% in Q1 2026 from 27.37% in Q4 2025, the fourth straight quarterly increase and the highest since Q1 2022, and refinance-related defects rose to 38.57% of all defects.
HousingWire notes ACES said mortgage rates dipping below 6% in February helped spur faster refinance growth, which in turn created additional eligibility and compliance challenges for lenders, according to Nick Volpe, executive vice president of ACES Quality Management.