State Housing Finance Agencies & Authorities Quality Assurance Programs

We are getting prepared to do business with MassHousing and looking at their Quality Assurance program, they require lenders to set and manage to their own target defect rates. They expect lenders to set target defect rates as low as reasonably possible, and to demonstrate to them how we are managing loan quality to meet the established target. We already have a Fannie-Mae QC proogram and process in place, which addresses any findings both significant and insignificant. Our underwriting process is also well established and defects are extremely rare, if at all. For those of you that have programs for state finance agencies and authorities and have an establish quality assurance/control program, how did your management team establish the defect rate? What is your defect rate? Any help or guidance would be appreciated.