Adhering to the quality control principles is critical for mortgage lenders whether they are striving to meet the regulations of FHA, HUD, Freddie Mac, or any other regulator. Reliable Quality Control and Quality Assurance Programs are essential for lenders in the finance industry as they help in the improvement and enhancement of the overall mortgage workflow. Successful mortgage organizations acknowledge the fact that quality begins even before the mortgage application is accepted and continues throughout the origination and servicing lifecycles.

With a foolproof prefunding quality assurance and post-closing quality control system, lenders can better tackle file errors and ensure regulatory compliance. By consistently monitoring and analyzing the integrity of critical loan origination and servicing data, lenders can evaluate the source-cause analysis of process errors identified in the mortgage QC process. This, in turn, enables the lender to introduce changes to the workflows and lay the foundation for continuous process improvements.

Mortgage Automation tools like MSuite doubles up as a rule engine to perform various automated QA Reviews such as a thorough review of files being acquired for servicing and Underwriting of certain loan types with specific borrower profile.  Lenders can leverage the robust and dynamic rule engine to manage thousands of rules seamlessly and customize it for every deployment to ensure it covers only those rules that are required for the particular scope of work

Essentials of a Mortgage Quality Control Plan

mortgage quality control plan

Below are a few critical factors that must be considered for a comprehensive and effective mortgage quality control Plan.

  • The QC plan must be well-documented and it must clearly state its purpose and goal.
  • The QC plan must have standard operating procedures for all stakeholders and should clearly define the sample selection criteria.
  • The mortgage QC process must be performed constantly or on a regularly scheduled basis.
  • The QC audit must be performed by an individual who is independent of the function being evaluated.
  • The plan must include critical metrics and Key Performance Indicators (KPIs) to give a clear picture of the process or function being reviewed.
  • The plan must encompass all critical mortgage lifecycle phases such as underwriting and credit analysis, pre-closing/post-closing activities, closing processes, and other important loan functions such as loan boarding, loss mitigation, REO management, customer service, collections, asset disposition, and more.
  • There must be a transparent and easy-to-follow process to report the findings to the management along with the mechanism for effective monitoring of the process and initiating corrective actions.
  • The QC plan must lay the procedures for root-cause analysis for identifying systemic vs. non-systemic issues and the necessary corrective actions.
  • Depending on the outcomes of the root-cause analysis, the mortgage QC process must facilitate key changes and modifications for the desired process improvements.

The Best Approach to Mortgage Quality Control and Quality Assurance

There is no one-size-fits all quality assurance framework for mortgage lenders. Lenders must weigh in the different aspects of their organizations and devise a mortgage quality assurance program accordingly. On this note, the organizational factors that must be considered are:

•            Structure and stature of a lender’s organization

•            The types of mortgage loans the lender specializes on

•            The volume of mortgage loans processed

•            The experience of the in-house team

•            Lenders’ area of operation

•            The origination of loan sources

•            Internal policies and procedures followed by lenders

As mortgage lenders operate in an industry with dwindling margins and increasing mortgage QC process complexity, cost-optimization of operations is the key to profit and survival. The QA/QC processes, being tedious and resource-intensive, are being transformed by the application of technology in order to realize better outcomes cost-effectively. Smart lenders are quick to enhance their mortgage quality assurance processes with the automation of workflows, reporting, and analysis.

Steps that  Lenders Must take to Boost Loan Quality and Reduce QA/QC Costs

Process Automation

Rising compliance costs are a major concern for all lenders and as a consequence, they have turned to the use of automation technology, particularly in acquisition, front-end, and backend functions to reduce the dependency on their human workforce. With automation, the handling of applications throughout a mortgage transaction and the extraction and analysis of relevant data is handed over to machines. The automated compliance systems eliminate the scope of manual errors and process delays that can otherwise cost the lenders dearly.

Technologies such as optical character recognition (OCR) systems and other mortgage QC solutions enable mortgage businesses to subject documents to rule-based auto-checks and free up the time of the core team. Thus, the employees can focus better on the more critical areas of the business such as customer service and mortgage inspection.

MSuite can recognize 350+ types of documents (including those with varied formats) and extract data points from various documents such as income, asset, collateral, closing docs, final docs, insurance docs etc. It guarantees 98+% of data accuracy.  

Intelligent Reporting

Reporting is another resource-hungry and critical function in the mortgage QA/QC process that must be precise and comprehensive to allow the stakeholders to draw helpful conclusions. For the management to be able to predict industry trends and analyze market dynamics, reporting must be tailored to the unique characteristics of the organization. Technology has empowered lenders with modern reporting and trend forecasting tools to create insightful and interactive reports at the click of a button.

Digital reporting tools facilitate the creation of smart reports that go beyond facts and figures to craft informative and compelling stories with relevant information. With the ability to assemble data-rich reports using an elaborate toolkit, it’s easier for decision-makers to monitor the functioning of their organization and take the best actions accordingly.

Deeper Analysis

Critical analysis of the findings of Quality control reporting is an integral part of the mortgage lender’s routine functions. When technologies such as Data Analytics and Artificial Intelligence are infused into the manual reporting processes, they automate laborious tasks such as report comparison, data analysis, and information presentation. Using industry-standard technology, the management gets access to hidden insights and intelligent recommendations for improving the loan-level production process and their overall portfolio and performance.

Such new-age technologies have enabled mortgage companies to adhere better to the eligibility criteria and regulatory requirements while reducing their expenses on compliance and production. The frequency of loan reviews can be reduced by the interpretation of data to develop predictive selections. By leveraging technology, lenders can allocate operational budgets with higher efficiency and detect financial risks across the pipeline.

Detection of Frauds

Although nothing much can be done to completely weed out the origination of fraudulent loans, lenders can bank on technology to identify all such frauds and avoid business loss. Digital tools help lenders with auto risk assessment, AVMs, backup credit reports, collateral underwriting, and the like to detect possible frauds and information misrepresentation in loan files.

For better outcomes, lenders can use technology to evaluate previous post-closing quality control reviews to identify poorly performing processes and individuals. Intelligent tools facilitate corrective actions and help process more pre-closing reviews to discourage fraud while saving staff time in reporting and responding to cases with significant defects as identified in post-closing QC reviews.

Sampling Methods

No lender can afford to own the infrastructure to perform a quality control review of every loan that’s originated or purchased and hence, they use loan sampling techniques depending on their origination or loan purchasing volume. Sampling provides objective results to minimize bias and helps in drawing conclusions about the population being reviewed. There are there primary sampling techniques used by lenders across the US. These are

  • Statistical sampling
  • Random sampling
  • Discretionary sampling

Of these three methods, statistical sampling is the most cost-effective and efficient technique where a finite number of cases are reviewed with the intent to draw definitive conclusions about the sample population. In statistical sampling, it can be assumed that the frequency of errors in the samples can be extrapolated proportionately to the entire population of cases.

Random sampling provides an unfiltered view of the entire mortgage population where each loan has an equal probability of being selected for the QC process. The ideal way to practice random sampling is to select samples from distinct populations of different product types or specific regions or markets. The samples selected must be from over the course of a 12-month period and must be representative of the full scope of the product lines being offered, the channels of offerings, and the purchasing source.

For practicing discretionary sampling, mortgage loans are selected non-randomly from a specific population. The advantage of using discretionary sampling is that relevant information about a specific process, stakeholder, product, etc. can be obtained much quicker. Mortgage companies use this method to evaluate employee performance and establish if there is any suspicious activity within operations. For executing internal QC processes, mortgage businesses usually prefer random and discretionary sampling techniques.

Advantages of Outsourced Mortgage QA/QC Services

Because mortgage quality assurance and quality control processes involve substantial cost and effort, and the processes are characterized by complex structures and reporting, lenders prefer the QC services of external mortgage service specialists. Outsourcing helps lenders accommodate the sudden volume spikes and gain control over the mortgage QC services to ensure business profitability. Besides those, here are some of the compelling benefits mortgage businesses enjoy by outsourcing their QA/QC processes.

Reduced Overheads

External mortgage quality control companies usually offer fixed-price QC reviews depending on the type and duration of the engagement. This helps the client to accurately set their operational budget for the year and allocate funds to the other areas of operations. On the flip side, an in-house QC department implies much higher costs and efforts to make arrangements for training and developing the skills of the internal team.

Accurate Reporting

Most small and mid-sized mortgage companies lack a stable in-house system to create meaningful and statistically valid reports. But reliable mortgage quality control partners have the necessary reporting tools to produce accurate reports that deliver actionable insights to the management for improving the overall process. Such a competent vendor has the resources to create detailed custom reports as well as summary results as they are very well familiar with the origination and servicing processes of the industry.

Better Sampling

Most mortgage organizations are already running understaffed due to high operating costs and hence, it’s difficult for the in-house team to accurately target the discretionary reviews by drawing statistical, stratified, and targeted samples. Since the sampling strategy selected is a key component of quality control, a seasoned mortgage QC company takes into account the client’s unique historical and ongoing process risks and helps it realize quicker turnaround times.

Regulatory Compliance

External mortgage QC companies employ seasoned subject matter experts to enhance their adaptability and flexibility and assist the client in tackling scalability obstacles. The specialists deployed by the mortgage QA/QC vendor keep themselves updated on the industry’s best practices and regulatory requirements. Since mortgage quality control partners serve multiple clients with varied needs, their exposure is wider than the in-house teams of the lenders, and hence they are equipped with better mortgage QC solutions to ensure unhindered mortgage operations.

Scalability and Process Improvements

In the case of in-house teams, the auditors generally take time to master the QC process, and reporting of defects and suggesting process improvements are inefficient during the initial months. This, in turn, makes business scaling an unlikely development since the management is forced to invest its precious time in daily firefighting. Outsourcing of the QC audit process has been proved to be a big leap towards achieving higher efficiency and business scalability. A reputed mortgage quality control company would help the client refine its mortgage workflows by using customized software and secure system protocols.

Whether the mortgage lender decides to execute its QC in-house or opts for the reliable services of a well-established outsourcing firm, the client must work towards establishing a formal QC process. It must act on the findings and issues identified during the audit to enhance the underlying processes and realize the desired outcomes. Since outsourcing allows lenders to realize enhanced customer satisfaction, greater revenue, accelerated turnaround times, and a platform to scale operations, it’s a no-brainer for most major lenders across the country.

But to connect with a worthy mortgage QC company, the lender must conduct an extensive analysis of the prospects and match their charges and expertise to its business needs. Connecting with the past clients of the vendor and assessing its commitment to work would be handy while gauging its worthiness.

Who We Are And Why Our Expertise Matters?

With over a decade of serving mortgage organizations across the U.S., today Expert Mortgage Assistance stand as a reliable, go-to provider of mortgage QC solutions to an elaborate list of lending institutions. Our expert mortgage QC services team offers exclusive audit customization services to meet today’s industry demands and without stretching the client’s budget. We use rigorous and unbiased mortgage fraud detection methods by employing compliant mortgage quality control procedures to enable you to mitigate all loan underwriting risks and maximize your profits.