The mortgage lending process is fraught with increasing number risks. Such risks range from fraudulent loan applications to process loopholes that result in disbursing bad loans. These risks are just the tip of an iceberg. The ongoing Covid 19 pandemic, socio-political strife such as the recent Russian insurgency into Ukraine, and factors alike have continually led the economy into a tailspin. This has a direct bearing on the risk factors. For instance, changing economic situations disrupt the fiscal health of borrowers. Lenders find it hard to keep track of such borrowers and end up approving a loan to a potentially risky borrower.

Economic uncertainties are beyond the control of the lender. However, the consequences have an impact on his business. A proven way to counter such risks is high level of preparedness. And the best way to achieve this is by having simple mortgage process flows. Currently, it is extremely long-winded and convoluted. This blurs the lenders’ visibility in potential risks such as forged employment proofs, documentation errors during appraisal, and so on.

This is where mortgage BPOs have gained specific relevance. They bring the necessary expertise and technological support to overhaul the mortgage lending process. This becomes the key for lenders to mitigate the generic to evolving lending risks.

In this article, we will discuss about the top mortgage lending risks and how mortgage BPO providers help to mitigate them.

Key Lending Risks and How a Mortgage BPO Can Mitigate Them

Fraudulent Mortgage Application

Borrowers misrepresent their employment status or their income to qualify for a mortgage loan. Such fraudulent applications for mortgage loans cause lenders disburse bad loans. Such loans end up having below-par resale values in the secondary mortgage market.

There are also instances of individuals using a stolen or synthetic identity to apply for loans. Once approved, they go off the grid and lenders end up with loan defaults.

Role of Mortgage BPOs in Mitigating This Risk

Mortgage process outsourcing companies or BPOs have deep expertise in the mortgage industry. This places them in the right position to guide loan officers to ask the right questions to verify a borrower’s true identity.

For instance, mortgage BPOs help to create a multiple-choice questionnaire based on a borrower’s presented credit report. A genuine borrower will be able to answer questions such as the previous type of purchase, the date, and others correctly.

They help lenders to cross refer the identity presented in the loan application with the public and private databases. Such cross reference will reveal synthetic identity data such as SSNs, date of birth, and so on.

BPO mortgage companies are known to use automation solutions to identify fraudulent loan applications. These solutions generate risk scores that imply the likelihood of applications being fraudulent. Based on the risk scores, loan officers investigate applications.

Appraisal Review Risks

There are primarily four appraisal review risks that lenders battle till today. Here’s a look at those:

  • It is an uphill task for mortgage lenders to ensure that their appraisers have the necessary certifications as mandated by different states. Such certification requirements are actively monitored by the appraisal subcommittee (ASC).
  • Lenders often falter while doing a complete examination of a collateral’s condition. They fail to consider the fact that such examination should not singularly stress on the physical condition of the collateral. Factors such as its distance from the airport, if the owner is actually occupying the property are some of the key determinants of a collateral’s condition.
  • One of the costliest risks is the inability of lenders to determine actual value of property. This hinders lenders to regain the complete loan value in case of foreclosures.
  • Lenders face the mandate the prove that they are not biased while approving loans to individuals.

Role of Mortgage BPOs in Mitigating This Risk

One of the chief reasons why lenders have started to outsource loan processing services is ensure complete regulatory compliance. This is one of the key factors that address most of the appraisal review risks.

Mortgage appraisal review servicers stay up to date with all the regulations relevant to mortgage appraisal review. Such regulations include the GSE Compliance Requirements, Home Valuation Code of Conduct, and others.

They leverage easy to use and advanced valuation tools. These are automated tools that can be programmed with business tools to create appraisal review workflows. This allows lenders to keep a complete track of the process. It is essential for lenders to demonstrate their regulatory compliance and an unbiased appraisal during external audits.

Post Funding Quality Check Risks

This is an extremely critical part of the lending process. After funding and closing a loan, lenders conduct post funding quality check on the loan. This is done to determine whether the closed loan is good enough to be liquified in the secondary market.

However, it requires a thorough QC check across intricate details such as audit reports, appraisal review, tallying dates, signatures with the loan application file.

Such a process is time-consuming, and it increases the chances of man-made errors. A single error makes a lot of difference in lenders’ decision to set the right value of a loan in the secondary market.

Role of Mortgage BPOs in Mitigating This Risk

Most of the prominent US mortgage process companies leverage digital technologies to conduct post-funding quality checks.

A digital QC platform creates workflows for data verification and document consistency check. These data QC check is done across more than one touchpoint which are the lenders, underwriters, and borrowers. Automated workflows foster collaboration among these touchpoints that enable quality checks in a uniform way.

MSuite- The Panacea to all Modern-Day Lending Risks

MSuite is an intuitively build and easy to use mortgage process automation tool. This tool is built on the principles of optical character recognition (OCR), ML, and AI algorithms.

It is the modern-day solution that help lenders overcome the complexities of long-winded mortgage lending processes and disburse risk-free loans.

The MSuite platform is constituted of five modules. Here’s a brief description of the modules:


The connector module facilitates easy integration of MSuite to any LOSs through APIs used by various stakeholders such as investors, loan originators, underwriters among others.

It easily extracts any specific data from multiple loan documents in an instant. This eliminates the need for agents to manually sift through documents. As a result, it slims the chances of overlooking any key piece of information.

MSuite’s connector continuously monitors hot folders in SFTP to alert loan officers in case of any new document upload.

Such new uploads can document any sudden change in the fiscal health of a borrower. Lenders must always stay on track with such information to take a sound loan decision.

Indexing Engine

MSuite’s indexing engine module is a combination of advanced AI, ML algorithms, and OCT. This empowers the module to process more than 350 types of documents in diverse formats.

It then stores the documents in digital formats at multiple lending databases. Such automatic processing of documents is done without compromising the document quality. The indexing engine processes documents that has a scan quality as low as 150 DPI.

Document quality is highly relevant in mortgage processes. It is because lenders have a high rate of dependence on data to perform loan audits, inspecting loan applications, and conduct other such high-risk tasks.

Data Extraction Engine

The data extraction engine module is programmed to extract relevant data points from collateral file packages and other loan documents.

This module guarantees 98% data accuracy while data extraction. It also includes exception handling for data that has below 90% OCR confidence score.

This eliminates one of the biggest risks of manual data processing which is erroneous data gathering and entry in loan files.

Rule Engine

MSuite’s rule engine module can be programmed with various business rules to conduct distinct mortgage processes.

For instance, the rule engine can be configured with lender-specific QC audit rules. Once configured, the module creates automated pre- or post-funding QC workflows to support lenders’ determination of loan valuation in the secondary market.

The rule engine module creates automated workflows to update itself with the ever-changing mortgage lending regulations. Lenders can follow these workflows to establish their regulatory adherence in their lending process.

Reporting Engine

MSuite’s reporting engine module generates regular reports. These reports provide a detailed summary of all the lending steps fulfilled and the quality level maintained in these steps.

These reports are key to understand and identify any risk of process loopholes. This allows lenders to fix the processes before it comes under the scanner of the regulatory authorities.  and Lenders analyze these reports to identify areas that require improvisation.

Lenders can customize these reports according to their operational requirements.

How We Assist You in Delivering Risk-Free Lending Decisions?

As the economy has started to look with a steady dip in unemployment rate, consumers are set to realize their housing dream. This means that lenders must gear up for an influx in mortgage loan applications.

This is good news for lenders in terms of business. But it peaks the typical lending risks as lenders will have to deal multiple loan applications. As a prominent mortgage process outsourcing company, we unburden you from going through the repetitive tasks to arrive at the final lending decisions.

We do it by leveraging our proprietary mortgage automation tool, MSuite. The tools eases management and tracking loan documents. Such a functionality is critical at the stage when lenders need to gather specific documents to repackage loan as per investors’ requirements in the secondary market.

Our tool helps in executing functions that are in line with all the relevant regulatory requirements such as the CFPB guidelines. This mitigates the risk of non-adherence of lending practices.

However, we believe in maintaining an optimal blend of human intelligence and artificial tools. This is why we house a team of industry experts who have all the necessary certifications to run all the critical lending processes.

They have avid experience about the simple to complex risks faced in the mortgage lending industry. The experts combine their experience and skills to create a multi-tier evaluation system. They run all the loan documents through this system to eliminate even the smallest risk of errors in loan documents.

Who We Are and Why Are We Considered as Industry Experts?

This article is authored by professionals at Expert Mortgage Assistance, a leading mortgage BPO. We facilitate seamless and risk-free mortgage lending process execution for lenders, credit unions, and brokers. Our proprietary mortgage automation tool, MSuite has been successfully applied to reduce loan processing TAT to 70%.