The Purpose of Mortgage Quality Control
Lenders have a mortgage quality control department with personnel who audits the loan files to make sure they amplify the guidelines, rules, and regulations of the mortgage industry. The purpose is to eliminate fraud, delinquency, and misrepresentations that could cause buybacks of loans from investors. Post updated 08-21-23
What Is The Focus of Mortgage Quality Control
Mortgage Quality Control is essential from the taking of the application to the closing of the loan. A borrower can forget something important about their financial status, assets, credit, employment, or anything pertaining to the mortgage loan.
The originator, processor, and underwriter may also forget something. However, if they forgot on purpose, be sure it will be common knowledge at some point. We are about to elaborate on mortgage quality control – why it is important, stick around.
No, we are not accusing anyone of fraud, but hey, it has happened in the past and there are people who deem it unnecessary for any institution to know everything about them. Well, the facts are that when you apply for a mortgage loan; get ready to tell your life’s history.
- Credit Report,
- Early Check (FNMA), Collateral Underwriter (FNMA), Quality Assurance System (FNMA), and other associations.
- CoreLogic Services – Financial Criteria, Employment Histories, when, where, how long, Property Values,& Analysis – when last sold, purchased, who, when and where, Rental Property Evaluations, Credit Analysis (liens, tax liens, judgments, etc.), and much more.
- Work Number For Everyone – Employment History
- Desktop Underwriter – Fannie Mae (FNMA)
- Loan Prospector – Freddie Mac (FHLMC)
- There are more than a few other software services that can be used by mortgage Lenders.
- Mortgage Loan Underwriters, Loan Originators, & Processors
It is the duty of all individuals that are associated with mortgage lending to make sure they originate, process, and underwrite the loans with integrity.
However, these individuals are only human and cannot see but so far within a mortgage loan. That is why there are other processes for checking the integrity of the proposed borrower, property appraiser, real estate agents, closing agents, and mortgage lender.
Borrower’s Responsibility
It is essentially important that a borrower give adequate, concise information and documentation. The lender must verify the information and prove it is legit. However, the borrower(s) giving the information will save time and effort if they are prepared for the application prior to visiting the lender.
Know your income, assets, liabilities which include alimony, child support (if applicable), and any other needed information. Get the scoop here.
Why Is Quality Control Important?
QC has always been important in mortgage lending, however, it appears that the Sub-Prime Market brought on a more dedicated stance for the need. The Sub-Prime Market had many flaws, and too many variances to make loans work. The old saying is if you give someone enough rope, they will hang themselves. That is kind of what happened in the Sub-Prime Market. It finally trumped into a catastrophe.
Rules and regulations were very lax, exceptions were made even to the lax rules, and people were making money and that was the main emphasis. Yes, most of the lenders fell prey to “making” the high dollars with Sub-Prime, and the GSEs followed suit.
What Caused The Most Concerns
The mortgage meltdown also followed suit and Americans and America lost financially in many ways.
There are still some lenders out there that will bend the rules and regulations, although I cannot name them as I want no part of that market ever again.
For the safety of all people, the lender, the investors (GSEs), the banks, and most of all the prospective borrower, it is always best to have safety guidelines. Guidelines that will dictate sound mortgage lending by following rules, regulations, and full disclosure.
Sound lending practices include responsible mortgage lending. Making sure the borrower receives the best mortgage possible for their qualifications. Nothing more, nothing less. The best mortgage product, the best interest rate, the least amount of closing cost possible, and property that supports the value and the loan amount.
The borrower has certain responsibilities also. They must have integrity, be mindful of rules and regulations, and present their personal employment, financial and credit history with principle.
All of the above can be coordinately done and will bring back the total integrity of our mortgage lending systems.
