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I have been in the mortgage industry for nearly three decades. Those who don’t know me might be surprised to know I developed some of the industry’s first quality control (QC) technology. Those that do know me, know it’s in my blood. And so, with confidence I can say that no good quality control plan is complete without a written Action Plan.
I’ve talked a lot about the benefits of Action Plan Reporting in a number of blogs, most recently last month.
Action plan reporting ties training programs to specific defects and then monitors their effectiveness in eliminating the root cause of the defects. For example, are income and employment verifications present? Is there an increasing number of appraisals missing from loan files? Both of these examples were among the top defects lenders battled amidst last year’s pandemic. If defects like these are occurring, you can track the effectiveness of action plans in reducing them and work with staff to adjust plans if needed.
Simply said, the Action Plan lays out what needs to be done and what will be done to ensure the remediation of defects and deficiencies found in loan reviews. Without it, the QC plan is just about pointless.
If there’s no action taken to correct worrisome defect trends and make adjustments in processes through required related training, deficiencies will continue and sooner or later the entire process will break down. This would prove very costly for any lender and could be even worse if found by a regulator or investor.
I thought it prudent to write more about Action Plan Reporting because in the interactions I have with lenders, this subject often comes up. It is amazing to me how many QC operations are settling for poor reporting in the technologies they are using or the outsourcers they do business with. And even those who have access to this type of reporting just have not taken the time to implement a new process that takes advantage of defect reporting and action plan tracking.
As the title of this post argues, QC Plans just aren’t effective without Action Plans.
Consider the example of going for your annual physical. After running some diagnostic testing a doctor tells you your cholesterol is high. To help lower it, she wants you to eat less red meat/processed food, add more fish and grains, exercise at least 30 minutes a day and monitor your blood pressure weekly. If you failed to follow the doctor’s plan, the outcome in six to twelve months – sooner even – could result in a very serious health event.
When it comes to instituting an Action Plan to correct defects, digital tools make the process easy to track and monitor. After identifying the defect, the plan of action and the staff members in the organization who need to be trained, these tools can allow you to define and record:
- Suspected root cause
- Target percent reduction
- Planned actions
- Marketing material used
- Key dates (i.e implementation, expected improvement, resolution)
- Owner of the effort
From there, QC managers can see the success rate of the trainings by watching the defect rate go south to reach the target goal.
It’s not enough to identify people, process or technology issues, you need to do something about making it right. That goes for taking care of your health and mortgage lending alike. Taking no action is a risk and a waste of time and money.
I have biked 25 miles multiple days a week for years, along with other health and wellness efforts to keep my heart healthy. I advise the industry to keep their QC controls healthy and to create and follow specific plans of action to correct the loan defects found through your pre and post-closing reviews. Your plan should then be tracked and results reported to each area of responsibility and senior management.
Don’t be left with a problem without having an adequate plan for correction. I implore you, start instituting Action Plan monitoring today. LoanLogics can help.
Reach out to LoanLogics ( loanlogicsinfo@loanlogics.com ) or me directly ( David.omalley@loanlogics.com ) to get started.
