Discretionary Post-Closing Reviews – NMP Skip to main content

Discretionary Post-Closing Reviews

Brandy George
Sep 12, 2016

Question: Our firm has recently been informed that we need to perform discretionary reviews on conventional loans. What is the criteria for review and do we include government loans in the selection?

Answer            
The purpose of a discretionary review—not to be confused with a “targeted review”—is to focus on areas that may pose an elevated risk for errors, misrepresentation and fraud. There are no volume requirements and there is no minimum or percentage of production.

It is at the lender’s discretion as to how many loans will be included in any audit period. For instance, selected loan files could be one loan or ten loans or more, depending on the need of the lender and based on the suggested criteria below.    

A targeted review is directed more in the vein of specific employees’ performance, new branch offices, new processors or underwriters, new processes and/or reviews of findings derived from pre-closing and post-closing reports.

Example of discretionary selections include:

►LTV ratios over 90%
Investment properties
High risk credit scores
Cash-out refinances
10% of new loan originators
All high LTV loans
Low FICO scores
Manufactured homes 

Discretionary reviews are required for FNMA and FHLMC products, although at this time FHA only suggests discretionary audits. Depending on your own reason for the review, it would seem prudent and necessary to include the entire portfolio of loan products in the selection process.

If you would like to know more about discretionary reviews, please contact me!



Brandy George is director of underwriting operations compliance and executive director of LCG Quality Control for Lenders Compliance Group. 

Published
Sep 12, 2016
CFPB Alters Threshold For Exempting Loans From Special Appraisal Requirements

The 2022 threshold for exempting loans from special appraisal requirements for higher-priced mortgage loans will increase from $27,200 to $28,500. 

Regulation and Compliance
Dec 02, 2021
Regulatory Review, Reformatted

The progress made to date with NMLS modernization

Regulation and Compliance
Dec 01, 2021
November Surprise: Fed May Accelerate Tapering

Chairman Powell tells Congress of concerns about inflation, COVID-19 variant’s effect on recovery.

Regulation and Compliance
Dec 01, 2021
FHFA's 2022 Conforming Loan Limit Maxes Out At Nearly $1M

Baseline limit for Fannie, Freddie increases to $647,200, but for 'high-cost areas' loan ceiling set at $970,800 for single-family homes.

Regulation and Compliance
Dec 01, 2021
Regulators Are Back In The Saddle

There’s not only a new sherriff in town, it’s a whole gang of them.

Regulation and Compliance
Nov 29, 2021
CFPB Seeks Insight On Creating A Fairer Mortgage Market

The Consumer Financial Protection Bureau has been actively looking to create a fairer mortgage market, free of discriminatory engagements. To do so, it issued a Request for Information to seek input on rules implementing the Home Mortgage Disclosure Act.

Regulation and Compliance
Nov 17, 2021