As a quality control expert with more than two decades of experience in the mortgage industry, MetaSource Senior Vice President of Mortgage Services Mary Kladde has seen all the ways in which loan quality can fall short.
But while loan defect reporting is an important process, required of any lenders doing business with the government-sponsored enterprises (GSEs), Kladde would like to see a stronger focus on some of the root causes of loan defects – and ways to correct them earlier in the process.
“Lenders don’t always focus on the right place,” Kladde says.
Reduce Risk with Pre-Close Quality Control
Kladde believes that lenders sometimes rely too heavily on post-close reporting and do not focus enough on their pre-fund underwriting and pre-closing reviews prior to funding. While the goal of reducing defect rates is a reasonable one, Kladde says, more attention to quality control pre-funding would go further toward the goal of reducing the risk of making bad loans.
For many lenders, the pressures of a tightening market that can lead to trouble are not raising the alarm bells that they should be, Kladde says. Housing inventory shortages, which are driving up values, combined with rising interest rates, are causing loan volumes to decline. Borrowers also are having more difficulty qualifying, she says. This creates ripe conditions for loosening credit and other practices that can lead to challenges.
Validation, Underwriting and Technology that Plays Well with Others
Kladde’s advice: Focus on your underwriting and closing to see how solid they are. Take a close look at your people and processes. Among the best practices Kladde recommends:
- Use trained, qualified underwriters to underwrite loans with expertise in validating data and an understanding of regulatory compliance
- Make sure your appraisals are sound: With demand outpacing supply, and markets where people are bidding over the asking price, it is more important than ever to be sure your appraisals are on the money
- Update Your Technology: The more automated your processes, the more accurate they will be. Many data discrepancies are the result of disparate systems that don’t communicate well with each other.
To learn more about how you can bubble-proof your QC and QA processes, join MetaSource at the Mortgage Broker Association’s Risk Management, QA & Fraud Prevention Forum in Los Angeles Sept. 23-25.
Kladde will be there as part of a three-member panel talking through loan quality in a tough market environment. The panel will “look at lessons from past cycles and discuss approaches for monitoring defect rates, and action plans to drive the rates down.”
To learn more about how MetaSource can help you with your loan quality control processes, you can visit us at the MBA Forum's Table 21, or click on the link below.
At MetaSource Mortgage, we offer a wide range of QC solutions for the mortgage industry, from loan boarding to reconciliation to third-party audit services, to the cutting-edge technology that ties it all together. We are dedicated to helping mortgage brokers, lenders, banks, and credit unions of all sizes comply with regulations, manage risk, and improve the quality of their loans.