These days, it can be easy to forget all of the more routine challenges that mortgage servicers face.
Millions of borrowers are seeking forbearance of monthly mortgage payments under the CARES Act, a provision of the federal coronavirus relief bill, and state relief efforts. With millions more expected to follow suit, many servicers are bracing for turbulence.
Best practices for managing financial arrangements like escrow or lender-placed insurance may seem like secondary concerns at such a time. However, quality control is even more critical for servicers during a time of disruption. Now more than ever, you need to limit your exposure to additional risks and ensure that you’re not adding to borrowers’ difficulties.
At MetaSource, our mortgage servicing quality control audits help servicers identify and correct areas of weakness in their processes. Our clients use these audits to drive efficiencies and improve customer service. Each year, we conduct an analysis of our audits from the previous year to identify issues that are a common source of trouble.
Top 5 Areas of Servicing QC Trouble in 2019
Our most recent mortgage servicing QC analysis reveals five areas where servicers struggled to keep their processes in line with best practices:
- Cashiering – missing or defective
- Customer Inquiries – timing violations
- Credit Reporting – missing or defective
- Lender Placed Insurance – timing violations
- Payoffs – missing or defective
According to Bret Cline, MetaSource’s mortgage servicing QC manager, “force-placed” insurance, also known as lender placed insurance (LPI), is a persistent source of trouble for servicers, and one of the primary risks for monetary losses assumed by servicers.
In many cases, the problem stems from poor communication between one servicer and another, or between a servicer and a borrower, when a loan is being transferred. Double coverage or inadequate coverage can leave the servicer on the hook, unable to recoup premiums or unprotected against damage that is not insured. Faulty practices around LPI can also draw the attention of state and federal consumer protection agencies.
“The key to following those regulations without penalties is to keep detailed documentation,” Cline said. “Findings show that with sufficient documentation, servicers can ensure that regulations are being followed. A thorough servicing quality control process can minimize avoidable findings.”
Limit Your Exposure to COVID-19 Disruption with Careful Quality Control
To minimize avoidable findings and limit exposure to COVID-19 disruption, you need to enhance your mortgage servicing quality control efforts. Best practices include careful record keeping and communication to ensure that required borrower communications are made on time, that communication policies are carefully maintained, and that any LPI premiums are promptly refunded as soon as evidence of homeowner’s insurance is received.
Improving escrow practices is another common recommendation arising from our audits. Findings show that many servicers fail to provide escrow refunds to borrowers within the required time frames. While the pandemic has led to concessions for borrowers, servicers must still meet their requirements. Refunds are still expected to be made within 30 business days of an annual escrow analysis.
Other mortgage servicing QC best practices include:
- Keeping up-to-date and thorough records of communication and contact history with borrowers
- Careful confirmation of all required documents sent to borrowers
- Recording legal documents according to the guidelines
- Knowing what documents are needed for quality control audits and having them on hand
Expertise and Technology for Mortgage Servicing QC
MetaSource offers 21 specific servicing QC audits, including a MERS Servicing QC audit. These can be selected on an a la carte basis and are ongoing throughout this period.
For mortgage servicers, quality control is not only a requirement for doing business with Fannie Mae, Freddie Mac, FHA, Ginnie Mae, and the Veterans Administration. It is also a way to ensure that you are providing top-notch customer service with operational efficiency. While the pandemic has created distractions from standard business practices, MetaSource is here to help support you and help keep processes on task. Give us a call or click on the link below to learn more about our expertise, QC services, and technology for servicers.