This year may bring the best home sales since 2007, according to the industry's leading prognosticators (including Freddie Mac). Even if short-term rates start going up, mortgage rates are expected to stay low and attractive to homebuyers and mortgage refinancers. That should mean many of our customers may see bigger mortgage volumes this year than in a long time.
Bigger mortgage volumes also increase the challenge to quality control managers to ensure mortgage manufacturing processes are in top form and in compliance with the different requirements from regulators, Freddie Mac, and other business partners.
So now is the time for lenders to give their quality control processes a spring tune-up to help ensure they are efficient, consistent, and effective.
Based on our experience, here is a partial list of to-do's for your next quality control tune-up.
Training: Verify the QC team is trained – or is scheduled for training – on the latest changes to your origination process and underwriting requirements, as well as new investor or mortgage insurer requirements. This includes new mortgage products like Freddie Mac's three-percent down payment Home Possible AdvantageSM mortgage, which lenders will start delivering on March 23.
Lines of Communication: Verify your QC team has easy access to 1) copies of your contracts and Guide Bulletins from Freddie Mac and other investors, and 2) clear instructions for alerting management when problems are found.
Reviewer Checklists: Check your team's quality review checklists to make sure they are clearly written, easy to use (i.e., in a Yes/No format) and up to date. Specifically, ensure they will verify:
- The accuracy and completeness of the origination documents
- The underwriting decision and acceptability of the mortgage
- The existence of required legal documentation
- That your company's policies are met
Pre- and Post-Closing QC: Verify procedures are up to date for sample selection, deficiency reporting, corrective actions, and resolution documentation. Use a combination of pre- and post-closing QC reviews with targeted and random sampling. Consider revising how often samples are selected based on changes in operations and origination volume. (We find many lenders prefer monthly sampling to cut the time needed for corrective action.)
Technology: Leverage all available quality control tools including Freddie Mac's web-based Quality Control Information Manager (QCIM). QCIM provides Freddie Mac Seller/Servicers with the status of quality control loan file requests, analyzes their overall QC trends, and creates customizable and loan-level reports for analysis. QCIM has also helped us to complete file reviews within 60 days and 95 percent of appeals within 30 days of receipt.
This is, of course, a partial list, and QC tune-ups should be in season year-round. Freddie Mac continually offers training, tools, and advice to help our customers keep loan quality high in a changing market. Be on the lookout for new details about the state of quality control on Freddie Mac loans and a guide to flexibilities for our lender customers. Add them to your checklist.
On-Line Quality Control Tune-Up Resources:
- Lender In-House Quality Control Web Conference (register on-line here):
Available Dates: April 16, May 13, June 10
- Quality Control: Freddie Mac Tip Casts, news, program updates, latest training opportunities.
- "A Renewed Focus on Quality Control" provides more information and advice for managing effective quality control programs.
Have a comment or question about this post? Email us to let us know what's on your mind.