Answers to Questions from Our Webinar “Essentials of a Compliant Mortgage QC Plan”
We want to thank everyone who attended our webinar “Essentials of a Compliant QC Plan.” As promised, below you will find answers to the questions asked during the webinar. You can also download the slides below.
Question 1 – How do you go about verifying assets?
- Answer – You would attempt to get the company to verify the information you have in your file is correct, via new VOD or phone conversation. You will want to assure that the asset documentation has not been forged or altered in any way.
Question 2 – We are a broker and most of our lenders will require a quarterly audit of our FHA loans. You mentioned the detailed QC Plan reviews are trickling downhill. Do you foresee lenders requiring their approved brokers to do more than the 10% of FHA loans being audited? The FHA loans are all we’re auditing at this time. Do we need to include all of our other loan types?
- Answer – I do not anticipate any lenders requiring more than the FHA required 10% selection. We are certainly seeing a bigger focus on Quality Control from all lenders and agencies. You are only required to audit files if your investors or licensing agencies require it. However, I would recommend you QC at least 10% of all your loans. This will give you a good baseline of the quality and risk level of all the loans you originate.
Question 3 – What is acceptable to meet occupancy certification requirements?
- Answer – There is not guidance on this topic. However, if audited, you will need to justify that a satisfactory attempt to verify occupancy was conducted.
Question 4 – Are these reviews [discretionary reviews] required if you’re a broker and not the lender?
- Answer – If you are a broker, then you are only required to conduct QC reviews if your investors or licensing authorities require you to do so. If those entities do not require discretionary reviews, then you are not required to perform them. However, it’s good business practice to know the quality of the product you are selling.
Question 5 – Adverse Action Reviews. Can they be done in house, with processing staff the same as the prefunding reviews, or do they need to be done using the same process as QC of closed files, in our case, outsourced?
- Answer – I am not aware of any rules stating Adverse Action reviews must be done independently. However, I have also not read where they are allowed to be outside of the independent QC department. This will need to be a company decision.
Question 6 – If we use a 3rd party servicer, who performs the audits?
- Answer – The 3rd party typically performs the audits.
Question 7 – To be in compliance with ECOA (Reg B) if we have pulled credit on a file as a pre-qual example TBD – are we still required to send a notice of action if we are unable to approve this loan due to excessive ratios or something along those lines, we would have pulled credit. These files would be either TBD loans or incomplete applications. These loans would not be subject to HMDA correct if they are a TBD property.
- Answer – ECOA’s definition of application is much more broad and vague than the RESPA definition of application. I would recommend in this example to meet your ECOA regulations–you either issue an approval or adverse action (denial) within 30 days. If your TBD meets the definition of Pre-Approval, you are required to report this transaction to HMDA.
Question 8 – Since your presentation is focused for the large lenders where agencies are performing audits–perhaps you can comment on the differences on QC level for the smaller brokers, ie is just having a company like MCA auditing our loan files enough?
- Answer – QC is about risk management, so I would I would suggest you complete as many of the steps as possible that I mentioned in the presentation. Obviously, you will not be reviewing as many details as the lender would. If you are outsourcing, your QC your vendor should be auditing your files according to your business type. When MCA audits a file, they only hold the broker accountable for items they have control over.
Question 9 – Will you please repeat the calculation for the defect rate?
- Answer – Fannie Mae defines Defect Rate as: The number of loans, expressed as a percentage, reflecting the total loans with defects discovered in the loan review process divided by the total loans reviewed.
Question 10 – It was mentioned that these webinars are available monthly. What do we need to do to be able to join every month?
- Answer – If you are on our newsletter list, we will send you an invitation to our webinar every month.
(Mortgage Compliance Advisors, LLC (MCA) makes reasonable efforts to ensure the accuracy of the answers. MCA makes no express or implied warranty of any kind respecting the information presented and assumes no responsibility for errors or omissions. This online chat is not legal advice and should not be used as a substitute for proper professional or legal advice.)