I get that question quite often, and I usually reply, “Your audit is based on what you are willing to invest in it.”
Most lenders and brokers do not want to invest in a thorough audit and only want to hit on the minimum to show that they are doing something. If you had an employee who only did the minimum standards in tasks assigned, how long would that employee continue to work for you? I would say not for long because the perception from other employees of that worker and problems with oversight and gaps that are discovered along the way will create more work for someone else to correct. Then, that below-par employee will come up with a number of excuses or place blame for their oversights and flaws instead of taking ownership and responsibility. This is what I often see in post-closing quality control. The lender or broker only wants a lower quality audit, then something happens later and there is finger-pointing everywhere and the lender or broker is faced with the expense and headache of damage control. Is it worth it in the end? Why not eliminate any potential issues right at the beginning?
For Quality Mortgage Services LLC (QMS) to perform a thorough post-closing review or audit, it takes at a minimum of four hours. If you want the “Wham, Bam, Thank You Ma’am” version quick and easy, it may take 90 min. to two hours. Think about what it takes to originate, process, perform pre-funding quality control, underwrite and fund the loan. Well, basically you want me to validate information, analyze the creditworthiness and collateral, re-verify income, assets, funds, gift letters, occupancy, re-calculate annual percentage rates (APRs), validate that HUD-1 disbursements were done properly, make sure there were no federal laws violated and write up everything found wrong in a report. Basically, perform every function in the entire loan process and validating, certifying, and affirming that the actions in the loan process are correct.
Just like when a city needs to cut spending … what department(s) are they going to cut? The police department, fire department, education department … I ask the same thing, what do you want me to cut? Appraisals, federal regulatory compliance, APRs, re-verifications, etc.?
The “Quick and Easy” lenders and brokers … your time has arrived. Investors are pushing repurchase claims down to the lenders, and the lenders want to share the expense of the put back with the brokers and third-party originators (TPOs). Now is it worth it? Is Russian Roulette the game you want to play with your quality control program? The best thing to do is not to play the game at all.
Quality Mortgage Services wants to help you be successful by indentifying gaps in your pre-funding QC process. The Mortgage Analysis Review Software post-closing quality control report empowers the QC manager with the tools to measure the effectiveness of pre-funding quality control and correct gaps left in the loan process.
Tommy A. Duncan is executive vice president of Quality Mortgage Services LLC. For answers to your QC and FHA questions, please contact Tommy at (615) 591-2528, ext. 124 or e-mail [email protected]