Mortgage Loan Quality

Do You Shotgun Your Loan Reviews?

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risk-scoring-targeted-samplingHow are you selecting loans for your pre and post-close reviews? Are you still using the standard random sample method?

Is it every 10th loan or some variation? Do you really believe you are getting the best results for the audit dollars you spend? Probably not, if you’re still “shotgunning” your loans for selection.

The 10% random selection may satisfy the technical requirements for QC but does it provide the desired results? Your selection should be made based on the loans that may cause you the biggest risks and problems. This can be determined by comprehensive defect management and risk scoring.

The defect management will identify what defects you need to look for, while the risk scoring will identify which loans you need to be reviewed. Together, these will provide much better protections against future problems and potential repurchases.

There are various selection and risk models available to help you determine the loans you need to review. LoanLogics has partnered with Milliman, one of the world’s largest independent actuarial consulting firms, to provide both default and risk scoring. The use of the Milliman Loan Scoring models will identify those loans either in your pipeline, or those you wish to purchase, with the highest risk of a potential default, and/or repurchase.

This information, coupled with loan experience with defects, investor delivery suspensions, loan defaults, indemnification, and repurchases, will provide you the foundation for a much more detailed discretionary sampling of loans for your reviews.

Stop doing what you’ve always done. Don’t just do what is minimally required.  Do what’s best to manufacture better quality and compliant loans. Do what’s best to decrease costs and increase profits.

The game has changed. Play different.

 

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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