Mortgage Loan Quality

Why is QC Important? Here’s 2 Billion Reasons

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ubs-fined-two-billion-dollarsUBS Real Estate Securities suffered a major setback recently when US District Judge, Kevin Castel, ruled on a breach of warranties by UBS in connection with securities backed by loans sold to U.S. Bank.

In the suit, US Bank, acting as trustee, is suing UBS for damages of more than $2 billion (Defective Loans). That could have paid for quite a few QC audits.

US Bank is claiming that the loans included in the security failed to meet standards established for income, employment and occupancy.

In essence, the loans were not originated properly, and UBS misrepresented the quality of the loans used to back the securities they issued. These securities contained loans originated by various lenders including Countrywide, IndyMac, American Home Mortgage Investment and Mortgage IT. Interestingly, Countrywide, IndyMac, and America Home are no longer in business.

Again, this points to why the quality control reviews, both pre and post-close, are so critical in mortgage lending process.  These reviews help lenders identify, correct and avoid defects which could lead to indemnifications, buy-backs, fines, and penalties.

QC due diligence reviews are just as important to investors purchasing loans and those issuing securities backed by the loans.

The lenders originating the loans purchased and/or securitized may not be around when things go wrong. Somebody’s gonna get left holding the bag. In this case, it looks like it will be UBS.

If you’re originating, purchasing or securitizing mortgage loans and not seriously conducting adequate QC reviews you are in for big trouble.

Trust but verify. You may trust in the loan originators but you better be verifying that what is being done in originating, approving and closing the loans is being done in accordance with all related guidelines, rules, and regulations.

LoanLogics can help. If you’re a lender we can provide detailed pre and post-closing audits. For investors, we can perform your pre-purchase due diligence reviews.

Don’t assume that everything is okay. Get the peace-of-mind of knowing that the loans being originated or purchased were done so correctly. Identify problem loan originators before it’s too late.

UBS can give you about 2 billion reasons why it’s so important to do so.

Michael Vitali

About the Author

Michael Vitali

Michael L. Vitali – Independent Consultant to the Mortgage Industry Mike Vitali is an independent consultant to the mortgage industry on matters concerning compliance and mortgage lending. He most recently served as the Senior Vice President and Chief Compliance Officer for LoanLogics, monitoring regulatory developments and their practical implications for the mortgage lending industry. His duties included research, interpretation, and analysis of existing and proposed legislation related to the industry in support of recommendations for policy and/or procedure changes to maintain continued quality and compliance with all applicable laws, rules and regulations, investor requirements, and standard mortgage practices. In his more than 40 years in the mortgage industry, in senior level management, he has gained experience in all areas of mortgage lending, risk management, and compliance. Mike is a past President of the MBA of Greater Philadelphia, is a charter member and was the second Chairman of the MBA of Pennsylvania, and a past board member and Legislative Chair of both associations. He is a recipient of the 1998 Mortgage Banker of the Year Award from the MBA of Greater Philadelphia, and the 2003 Chairman's Award from the MBA of PA, and currently serves on several compliance related task forces for MBA.
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Michael Vitali

About Michael Vitali

Michael L. Vitali – Independent Consultant to the Mortgage Industry Mike Vitali is an independent consultant to the mortgage industry on matters concerning compliance and mortgage lending. He most recently served as the Senior Vice President and Chief Compliance Officer for LoanLogics, monitoring regulatory developments and their practical implications for the mortgage lending industry. His duties included research, interpretation, and analysis of existing and proposed legislation related to the industry in support of recommendations for policy and/or procedure changes to maintain continued quality and compliance with all applicable laws, rules and regulations, investor requirements, and standard mortgage practices. In his more than 40 years in the mortgage industry, in senior level management, he has gained experience in all areas of mortgage lending, risk management, and compliance. Mike is a past President of the MBA of Greater Philadelphia, is a charter member and was the second Chairman of the MBA of Pennsylvania, and a past board member and Legislative Chair of both associations. He is a recipient of the 1998 Mortgage Banker of the Year Award from the MBA of Greater Philadelphia, and the 2003 Chairman's Award from the MBA of PA, and currently serves on several compliance related task forces for MBA.
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