Compliance is costly, but it’s more critical to the bottom line than ever before and can save lenders big dollars in regulatory scrutiny. Strict Fannie/Freddie requirements are forcing many lenders to identify and eliminate mistakes in home loans.
A community bank should be aiming for a loan defect rate of just 1%. That means just 1% of the bank’s loans would be considered high risk (unable to be sold to Fannie/Freddie). There was a time when a 10% number seemed reasonable to most bankers, but the GSE’s are demanding that lenders produce higher quality loans with few mistakes.