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Mortgage QC Best Practices to Ensure Compliance in Any Market

While you can’t control rising interest rates or changing economic conditions, you can control your quality control (QC) processes. The right QC practices bring a level of stability and consistency to your organization that you can use to succeed – even in uncertain times.

And uncertain, stressful times are certainly here as regulators continue to enhance enforcement. Just over the last few months, the Consumer Financial Protection Bureau (CFPB) has announced its commitment to resolving issues surrounding fair lending and also publicly promised to crack down on repeat offenders. This increased scrutiny puts additional pressure on lenders.

Fortunately, ensuring compliance during this stressful time is possible. You just need to make your mortgage quality control processes the best they can be. Here are some best practices to help you do just that.

Keep Up with Requirements

Stay Up to Date on Investor Expectations

Staying up to date on investor guidelines and rules is key to ensuring compliance and salability during any and every climate. Make a point to regularly monitor investor and agency requirements, so you’re always in the know and can avoid the unnecessary costs of non-compliance.

Know When to Audit Monthly vs. Quarterly

Did you know that if you start closing over 15 loans per month, you need to adjust your auditing intervals? According to Fannie Mae and FHA guidelines, lenders who close at least 15 loans on a monthly basis should conduct audits monthly. If you close fewer than 15 loans a month, you can choose to audit quarterly instead.

Effectively Document Changes

Many lenders struggle to provide documentation on the addition of new fees. This is a requirement of the Consumer Financial Protection Bureau (CFPB) and a common source of quality control issues. Fortunately, it can be easily addressed by creating documentation policies and procedures. Your strategy can be as simple as storing change of circumstance notes in a specific and easily accessible folder.

Tighten Up Your Processes & Oversight

Test at Least One File per Loan Type

Whether you’re originating conventional loans, government loans, or both, you should audit a minimum of one file for every product type.

Mirror Your Pre-Fund & Post-Close QC Processes

Fannie Mae, Freddie Mac, FHA, and many other investors require pre-fund QC auditing in addition to post-close. Pre-funding QC is your last chance to correct any errors prior to closing and before investor purchase, when they can become much bigger issues.

You can drive results for pre-fund targeting if you actively share information and data between these two functions. Trend tracking is an effective way to ensure your employees and business segments are producing quality loans and to identify opportunities for improvement. For more information, read our whitepapers on post-close QC best practices and pre-fund QC best practices.

Take Advantage of Tools & Resources

Embrace Technology

The right mortgage technology solutions can help you overcome QC obstacles like missing documentation. As a primary source of QC findings year after year, finding a solution to missing documents is key to ensuring compliance.

Solutions that eliminate the need to switch between platforms during the quality control process are particularly beneficial as they reduce the chance of missing files. MetaSource’s integration between our QC audit software, QLinkTM, and ICE Mortgage Technology’s Encompass®, for example, allows you to select and submit loan documents for audit without ever leaving your LOS. Consider adopting solutions like this one to avoid findings and the secondary penalties that accompany them.

Outsource Mortgage QC

Keeping up with requirements and ensuring mortgage compliance isn’t easy for internal QC teams – especially ones that are understaffed, underfunded, and under stress due to increased scrutiny. They often lead to increased compliance risk and, in turn, unnecessary expenses.

Outsourcing QC, on the other hand, results in improved compliance and significant cost savings due to a variable cost model – something that’s particularly beneficial while navigating inflation. In fact, one of the country’s top independent purchase mortgage lenders reduced its QC costs by 50% by outsourcing compliance audits to MetaSource. Read our case study to learn more.

Get the Mortgage QC Help You Need to Succeed

MetaSource is dedicated to helping you succeed with the right mix of technology and outsourced services. We take pride in providing our clients with the QC solutions they need to streamline processes and eliminate obstacles. We can help you stay focused on higher level tasks, while we do the heavy lifting with fast turnaround times.

Contact one of our mortgage QC experts to learn more about how to implement the best practices listed above.

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