NATIONAL NEWS (DENVER, Colo.) — — ACES Quality Management® (ACES), the leading provider of enterprise quality management and control software for the financial services industry, announced today that the overall critical defect rate fell to 1.64% in the second quarter (Q2) of 2026, according to its quarterly ACES Mortgage QC Industry Trends Report. The 4.1% drop from Q1 marked the first decline between the first and second quarters since 2023, though the rate remained 8.6% higher than a year earlier. The report analyzes post-closing quality control data from the ACES Quality Management & Control® software.
Key findings from the Q2 2026 ACES Mortgage QC Industry Trends Report include:
* The overall critical defect rate declined 4.1%, from 1.71% in Q1 2026 to 1.64% in Q2 2026, and remains below both the median and average rates recorded since Q1 2021. The rate was up 8.6% from 1.51% in Q2 2025.
* Income/Employment defects rose 15.5%, from 20.07% to 23.18%, returning the category to the top spot after two quarters at No. 2. Calculation errors drove most of the increase, rising from 45.28% to 51.43% of the category’s findings.
* Legal/Regulatory/Compliance defects fell 17.3%, from 26.02% to 21.52%, ending a run of four consecutive quarterly increases. The top two categories together accounted for 44.7% of all critical defects, compared with 46.09% in Q1.
* Borrower and Mortgage Eligibility defects rose 60.4%, from 7.43% to 11.92%, moving the category to third place. Appraisal defects rose 38.5%, from 3.35% to 4.64%, the category’s highest share since Q2 2025.
* Assets defects increased 11.3%, from 10.41% to 11.59%. Liabilities defects fell 14%, from 10.78% to 9.27%, and Credit defects fell 4.4%, from 5.2% to 4.97%, the fifth consecutive quarterly decline for Credit.
* Refinance review share fell 35%, from 32.05% to 20.83%, while refinance defect share fell 18.7%, from 38.57% to 31.37%. Refinance defect share has exceeded refinance review share for 10 consecutive quarters, and the gap between them widened from 6.52 to 10.54 percentage points.
* Conventional defect share rose 13.6%, from 57.21% to 65.01%, its highest level since Q1 2025, and now exceeds conventional review share of 60.77%. FHA defect share fell 13.5%, from 32.27% to 27.9%, and VA defect share fell 37.1%, from 9.78% to 6.15%.
“Two areas stand out this quarter,” said Nick Volpe, executive vice president of ACES Quality Management. “Appraisal is often where problems arise first when property values are unsettled, and if the defect rate holds in the 4% to 5% range next quarter, we’ll want to dig into what’s driving it. Refinances are the other. Fewer of those files came through review in Q2, but they still carried a disproportionate share of defects. With rates higher in the third quarter, refinance volume may keep falling, and that’s exactly when lenders need to stay disciplined on the files that do come through.”
Purchase originations rose 8.4% to $360 billion in Q2, while refinance volume fell 5.5% to $207 billion, according to Mortgage Bankers Association estimates cited in the report. Refinance share of the overall market fell from 39.75% to 36.51%, a far smaller shift than the 35% drop in refinance review share within the ACES data. The 30-year fixed mortgage rate ranged from 6.23% to 6.53% during the quarter and averaged roughly 30 basis points higher than in Q1 amid the conflict with Iran.
The ACES Mortgage QC Industry Trends Report is published quarterly and is based on post-closing audits of loan files that lenders selected for full-file reviews. The Q2 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;
* 8 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, including the ability to evaluate loan risk at scale 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.
This version of news story was published on and is Copr. © 2026 Massachusetts Newswire™ (MassachusettsNewswire.com)
