0
0
You’ve probably seen the commercials on TV with a bank security guard or a guy looking like a dentist, where they say they are just a ‘monitor’ but don’t do anything about what they find. It’s funny for a commercial, but not so funny to the bank or the patient needing dental work.
Today, with so much emphasis placed on loan defects, quality, and compliance, it’s important that any QC program is more than a defect monitor.
It’s great to perform timely and complete audits to identify defects, but that’s only half the battle. Something must be done to correct the defects and ensure that they do not continue.
That something is an action plan. That action plan is a process whereby once defects are identified; they may be tracked toward correction.
An action plan identifies trends and patterns in loan defects that can point to the source of the defects and indicates what needs to be done toward immediate correction and long-term resolution.
Some defects may be isolated instances, oversights, or a temporary lapse in judgment. Others may be indicative of major problems lurking just below the surface.
Like termite infestation, if not identified early and corrected, the damage can be quite costly. You can’t let defects eat away at your loan originations and your profits.
Your complete, written, and documented QC program should consist of a process that:
- Selects an ample number of loans each month for review which adequately represents the main areas of originations, their risk, and exposure;
- Provides a thorough due diligence review of the loans selected;
- Reports defects in detail, by area and severity. Showing how they would affect the loan’s performance and ability to be sold;
- Identifies the sources of loans with defects and the sources of the defects found;
- Selects additional loans from the pipeline for review based on the defects found in your initial loan reviews;
- Includes complete monthly reporting package to Senior Management and to each area responsible, identifying the loans with defects;
- Provides a written Action Plan identifying:
- The type of defects
- The source
- The process and activities taken toward correction
- Follow up and progress reporting until final resolution.
Having just a defect monitor is simply not enough. You must have a complete system that quickly identifies potential problems, and then initiates the follow-up needed to correct the problems and to make sure they don’t occur again.
Monitor your loans and take the appropriate action on defects. Otherwise, the defects will result in action being taken against you!
Don’t let untreated defects rob you of your profits or decay your pipeline.
Stay diligent my friends.
