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Generating High Quality Loans: How Shift Towards Internal Auditing Helps

mortgage lenders USA

With the growing emphasis on regulations, mortgage industry is making it necessary for all lenders to improve their corporate governance by shifting towards internal audit functions. The need to focus on internal audits has been dictated by not just Consumer Financial Protection Bureau (CFPB), but also state regulators and investors.

Shifting to internal audit ecosystem in mortgage industry is not only necessary but also beneficial in many ways. The best way to start the transition is by keeping the largest chunk of your auditing assignments in-house, while outsourcing some part of the mortgage loan process to third party vendors. This move will help lenders have complete control over their auditing process and have one less vendor to worry about. Additionally, internal auditing allows the lender to identify risks at their infancy and spot problem areas that can prevent huge remediation costs associated with federal and state level audits. Internal auditing serves as an early warning system that can translate in to significant cost savings by keeping the process under tight control.

To strengthen the internal audit system, the lenders can leverage advanced technology that can help them assess risks and inspect loan terms at every stage of a loan lifecycle. The best part about going internal with your audit systems is that you do not need to incur additional expenses. However, this is not the only reason why a shift towards internal auditing makes strategic sense. Here are some more good reasons why this transition can prove beneficial in the loan process.

Read our e-book on The Rising Cost of Mortgage Compliance and Finding a Way to Profitability

The Rising Cost of Mortgage Compliance and Finding a Way to Profitability

Setting Right Expectations

With the help of internal audit, the management and audit committee can be provided independent goals regarding their risk management efficiency, governance procedures and control mechanisms.

Risk Assessment

With the help of well-organized internal audit system, the management can be apprised of key risks faced by the company and help them take corrective steps to mitigate any losses that can occur from those risks.

Eligibility to Sell to Fannie Mae

GSEs such as Fannie Mae requires its sellers and servicers to have internal audit and control mechanisms that can monitor and assess the quality of loans that are being generated.

Operational Enhancement opportunities

Internal auditing empowers lenders to not only have greater control over their lending environment but also identify operational inefficiencies that can prove costly for the business. Additionally, it can also help in reducing costs by keeping the audit function in-house.

Fewer Compliance Violations

Operational inaccuracies can quickly become compliance errors or blunders that can sour your relationship with the borrower. However, internal audit reviews all the operational processes that can prevent these errors and reduce expensive customer litigation costs.

Mortgage companies should embrace internal auditing for a lot of reasons. For the management to leverage the full potential of bringing the process in-house, they must ensure that the individuals entrusted with the task are knowledgeable and have the necessary skills to execute a complex task such as internal audit. To further streamline the process, lenders can outsource non-core competencies to third party vendors with a proven track record such as Expert Mortgage Assistance is a good option. We are a leading mortgage service provider with nearly 10 years of experience in a range of mortgage services. Talk to us today to discuss partnership opportunities.


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