How 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.