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CrossCheck-Consumer-LendingMortgage Loan Review Identifies Risk, Provides Risk Management Solutions

Today all lenders face substantial regulatory oversight in all phases of production — from origination to post-closing — due to tightened standards from the Consumer Financial Protection Bureau (CFPB) and investors.

Our residential mortgage loan review process takes a comprehensive approach by analyzing an institution’s risk management tools, approach and culture. It’s more imperative than ever that mortgage lenders have the right processes and procedures in place to comply with the new rules. We provide many services for mortgage lenders including:

  • Quality control (Prefunding and Post-closing)
  • Repurchase analysis
  • Portfolio due diligence
  • Mortgage servicing audits
  • HAMP and loss mitigation reviews
  • Mortgage insurance rescissions
  • Mortgage Electronic Registration Systems (MERS)
  • Fraud review
  • Vendor audits

Post-closing Quality Control

Government agencies/regulators, investors, and rating agencies are taking a much deeper examination of mortgage QC plans and the organization’s adherence to these plans. While regulatory requirements from the agencies and regulators do vary to some degree, each has similar requirements for QC plans and include the following characteristics:

  • Tailored to the scope of the mortgage business, such as mortgage product types, channels of production, locations of business, type of originators.
  • Designed to detect deficiencies in the origination of mortgage loans.
  • Evaluates and monitors the overall quality of the processes.
  • Provides effective reporting to senior management.
  • Is well documented and followed and understood at all levels in the organization.

When outsourcing the quality control function it is important to select a QC provider that understands and effectively addresses these new requirements. But just as important, it is critical that the mortgage lending operation has an effective vendor management process in place. The responsibility to have an effective QC plan cannot be outsourced. This responsibility remains firmly with the mortgage operation. The lender must have documented procedures in place to monitor and measure the quality of the outsourced work and take appropriate action if deficiencies are found in the work provided by the outsourced QC firm.

Prefunding Quality Control

The GSE’s have recently instituted prefunding quality control requirements. These requirements do not specify detail procedures and sample size. Instead, it is left to the lender to determine what is appropriate for effective prefunding quality control based on the size, structure, and products of the particular organization. Prefunding quality control should be incorporated into all quality control plans.

When outsourcing prefunding QC, a critical consideration is turnaround time. Because prefunding QC is conducted shortly before closing, a process must be established for timely communication between lender and vendor.

Servicing Quality Control

Several years ago no one was talking about servicing quality control. More recently, in the wake of multiple servicing issues and the servicer consent orders, GSEs and private investors have also emphasized servicing quality control and implemented new and enhanced requirements. Due to the spotlight on the quality of servicing, it is critical that servicers of every size maintain a strong quality control process. CrossCheck can assist with development and implementation of a servicing quality control program.