MetaSource Mortgage Blog

Dropping Interest Rates Boost FHA Mortgages and Need for Quality Control

Thursday, February 12, 2009

With mortgage rates at their lowest levels in over 20 years, brokers, retail lenders, wholesale lenders, banks, and credit unions are seeing increased volume in their residential mortgage pipelines. With this increase comes a need for sound quality control practices.

Salt Lake City, UT – February 11, 2009 – Recently, the Associated Press reported that mortgage rates reached 4.96 percent in mid-January. This is the lowest recorded level since Freddie Mac began its rate survey in 1971. With interest rates so low, the volume of residential mortgage loans has steadily increased, particularly in the FHA arena. So that a certain level of quality is maintained, one of HUD’s requirements is that institutions originating FHA loans perform an audit on 10% of the loan files that they have either closed or cancelled. These audits can either be done on a quarterly or monthly basis, depending on volume. In some circumstances, other agencies and investors are adapting this same requirement. According to Craig Christensen, President and COO of Mortgage Compliance Advisors, LLC, “more and more investors are requiring brokers, correspondents, and others to have a quality control plan in place that provides for [quality control] audits, before approval or renewal of contracts.”

Third party firms, such as Mortgage Compliance Advisors, LLC, can perform this 10% quality control file audit function, along with other compliance and quality control functions, for brokers, lenders, banks, and credit unions. These services help organizations remain compliant with FHA, investor, and other agency guidelines and maintain high loan quality. Furthermore, since quality control file audits are required by HUD/FHA, HUD mortgagees will be prepared for the eventuality of an FHA onsite audit, by keeping management reports (a summary of the files audits for a certain period) on file.

Management reports (sometimes referred to as quality control findings reports) are filled with detailed information that will significantly improve quality control. For example, when auditors at Mortgage Compliance Advisors, LLC, perform a file audit, they use a comprehensive audit checklist to check each page for accuracy and then record their findings. After the post-closing or cancelled file audit is complete, management reviews the audit’s findings and summarizes them into a management report that is accurate and easy to understand. Approximately 30 days after the files selected for audit have been received, Mortgage Compliance Advisors sends the report to the client to review. After reviewing the report, management can take any necessary action to ensure continued loan file quality and compliance with HUD/FHA or other conventional guidelines.

About Mortgage Compliance Advisors, LLC (MCA): MCA was founded on the premise of providing mortgage brokers, retail lenders, wholesale lenders, and banking institutions of all sizes with a sound alternative for meeting their mortgage compliance needs. MCA’s principals, Bob Warnock and Craig Christensen, have a combined sixty years of experience in the mortgage industry. Thirteen years of Bob Warnock’s thirty-five year career in the banking and mortgage industry were spent at the Salt Lake City HUD/FHA office, first as an underwriting specialist, then branch chief over underwriting and insuring, and finally as Field Office Chief with responsibility to oversee lender approval, underwriting, insuring and the assignment program. Much of Craig Christensen’s 25 year career has been in senior management positions with national retail and wholesale lenders.

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