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With all the talk recently about quality and compliance, we need talk about if a lender has an adequate written Quality Control Policy. Do you?
Whether you are outsourcing QC or performing it internally, a lender must have a written plan. This policy must clearly outline the scope of what a lender wants, and needs, to ensure their loans are originated, approved and closed properly, compliant with all guidelines, rules, regulations and laws, and of investment quality. The agencies require it and your success depends on it.
In general, your QC Policy/Plan should cover what loans are selected for review, how the selection is determined, the process for each loan’s review, by whom, reporting and record retention.
The policy must clearly outline that all results must be reported to both the individual business units, but also to Senior Management, or the Board, as the case may be.
Material defects affecting a loan’s eligibility must be reported to Fannie, Freddie, FHA or VA, as applicable. The plan must outline the ongoing monitoring and creation of action plans to correct defects, make needed process adjustments and provide training where needed to avoid future problems/defects.
Most important is to ensure that you and your staff are actually following the QC plan. It’s one thing to have a well-documented, printed policy in place; it’s another to have all audit staff follow it.
It’s like following the assembly directions provided by the manufacturer. Although the written directions are provided, how many times do we go ahead and try to assemble the product without using them? Only to find after much wasted time and frustration that we missed a step in the process.
Whether QC reviews are done in-house or outsourced, the plan should call for an “Audit the Auditor” function to validate that reviews are being performed in accordance with the plan. These calibration reviews should be done regularly with results documented and reported to senior management and the audit team.
Pre and post-close audits are required. You might as well do them right and get the biggest bang for the buck. You need to make sure your QC plan satisfies all the requirements of the agencies, FHA and/or VA. If you’re not sure, you better find out before it’s too late.
BTW, Loanlogics would be happy to review your plan to ensure compliance. Just let me know if we can help.
