MetaSource Mortgage Blog

Who's Auditing Your In-House Mortgage File QC Auditors?

Monday, December 07, 2015

Who's Auditing Your In-House Mortgage File QC Auditors?

Many mortgage originators and servicers conduct their own mortgage file QC audits. Who's auditing these auditors?

With continuously changing post-close, pre-fund, servicing, and MERS changes from Fannie Mae, Freddie Mac, FHA, HUD, and the CFPB, it's increasingly important to ensure your audit team is up to speed on all mortgage QC requirements and self-auditing your mortgage files properly.

Avoiding the Deutsche Bank Scenario

Deutsche Bank and their subsidiary MortgageIT settled federal fraud charges for $202 million as a result of repeated false certifications made to HUD in connection with the residential mortgage origination and sponsorship practices of MortgageIT. At the time of the lawsuit, the FHA had paid insurance claims on more than 3,100 mortgages, totaling $386 million, for mortgages endorsed by MortgageIT.

MortgageIT audited mortgage QC internally but it was not being done properly as no one was auditing the internal auditors. As a result, no one caught that thousands of verifications were being stuffed in drawers, never opened, for loans that should never have been made.

Auditing the Auditors

Who trains your auditors? Have you hired someone to train them along with internal auditors on top of that your internal mortgage QC is done properly? Not many outside of the big banks do this, which exposes them to the Deutsche Bank scenario.

Fear not: you now have the option of having our exceedingly trained staff of former underwriters audit your auditors. If you originate or service 5,000 mortgages per month and audit 10% (500), all we need to do is audit 10% of those (50). This will give you peace of mind that your auditors are doing the job and are trained properly for a fraction of the cost of loan buybacks or federal lawsuits.

Why Bother?

Maybe you are 100% in compliance with all government regulatory bodies. However, until you audit yourself, how will you know?

After auditing the auditors of one regional bank, we found a 60% mortgage error rate. Imagine the risk had HUD or the FHA discovered this instead of us.

Based on our findings, we can provide the appropriate level of training to get your mortgage QC auditors up to speed, and you'll always have the option of outsourcing your auditing to us. Doing the latter can cut your auditing costs by 15-25% per year and dramatically decrease your risk of being non-compliant and having to buy back loans.

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