Every financial institution should have a quality assurance plan as part of their overall risk management program that includes regular reviews of pre-funding and post-closing loan files. Pre-funding reviews allow lenders to identify and correct defects, such as underwriting and processing errors, inaccurate data, or inadequate documentation, prior to closing the loan, which can help avoid repurchase demands or unsaleable production. Post-closing reviews serve as a final check to ensure that the closed loan matches the intended product, maintaining overall portfolio quality. Both pre-funding and post-closing reviews are essential to ensure that loans comply with regulatory requirements, industry standards, and investor guidelines.
But who is doing these loan reviews? Do you have a second (or third) set of eyes on your loans? How do your results compare to industry peers? What about reporting? How much time and effort is being spent preparing regular QC reports for senior management, investors, and regulators? How much time is spent ensuring compliance with investor QC requirements, which can change rapidly?
The answers to these questions impact your budget and the one resource you can’t buy, trade for, or create – time.
How can a mortgage lender accomplish the goal of maximizing loan quality, minimizing risk, while preserving employees’ time? One way is to partner with a third-party compliance firm.
Partnering with a quality assurance expert can help you save time (and money) in several ways:
- No more repetitive or irrelevant findings. The CrossCheck team regularly reviews and adjusts the scope of file reviews, ensuring that the review process evolves with the mortgage lender’s needs.
- No more revising reports. Your vendor may provide you with slick reports that satisfy GSE/HUD requirements, but how much time does your team spend reformatting these reports for other audiences, like the board, management, or investors? A partner that produces made-to-order reports can save countless hours.
- No more depending on rookie reviewers. Inaccurate findings are often attributed to inexperienced analysts, something that you may find with a vendor offering you an off-the-shelf service. A partner employing highly experienced and tenured analysts will help ensure your team isn’t spending excess time with “check the checker”.
If your team is considering outsourcing some quality assurance functions, including pre or post quality control reviews, risk management, or regulatory compliance, make sure you work with a partner, and not just a vendor.
By outsourcing pre-funding and post-closing quality control and loan review functions, your company can benefit in a number of ways, including:
- Improved accuracy. Building a mortgage packet or any modern loan instrument is a complex operation involving dozens of individual documents from different sources that need to be checked, double-checked, and approved with minimal error to ensure the loan closes on time, and the customer is satisfied with the experience. While your team may be well-trained, experienced, and familiar with the process, having another set of eyes on your process and files can zero in on missed omissions, inconsistencies, or something worse. And having a committed partner means having someone who is aligned with your goals, and is incentivized to provide more than just data—they can provide strategic insight.
- Changes in volume. Businesses that have to adapt to variations in volume can take advantage of the flexibility of outsourced expertise to help manage the variable workload.
- Focusing on your core competencies. When employees spend time conducting audits instead of originating loans, that’s potential business lost to competitors. For example, the required reverification process of third-party documents can take countless hours each month given the multiple processes and attempts needed. These are functions that can be performed better by outsourced experts to save time and money.
Bottom line: outsourcing quality control functions allows for a better allocation of staff resources to tighten processes and improve loan quality.
CrossCheck Compliance has consistently achieved results for our clients across a broad spectrum of engagements. Our team of mortgage experts helps lenders identify and manage risk by offering independent, objective advice rooted in extensive experience and proven methodologies. Our expertise and services include not only secondary market QC, but comprehensive compliance services such as loan reviews to ensure compliance with all applicable regulations (including but not limited to TILA/RESPA, ECOA, Flood compliance); Home Mortgage Disclosure Act (HMDA) data integrity testing; Anti-money Laundering/Countering the Financing of Terrorism Audits; fraud reviews; and MERS reconciliations, monitoring, and annual quality assurance testing.
Whatever your challenges, our team can help your financial institution ensure compliance, mitigate risks, and enhance operational efficiency. Learn more about our services on our website.
CrossCheck’s Mortgage Chat, a quarterly informational series that addresses hot topics that arise as lenders originate, underwrite, and fund their residential mortgage products. You can submit a question to our expert team to get the guidance and support you need.
February 2025
