Posts Tagged ‘FHA file audit’

Nov
16
2009

Quality Control Guidelines Summarized for Fannie Mae, Freddie Mac, and FHA

Many investors and agencies, such as Fannie Mae, Freddie Mac, and FHA, require its lenders to have an active quality control plan in place. We wanted to help make the regulations more understandable for you, so we published an article summarizing basic quality control guidelines for Fannie Mae, Freddie Mac, and FHA. We hope you find the information useful — and we are always happy to answer your questions.

Read the full article summarizing QC guidelines for Fannie Mae, Freddi Mac, and FHA.

No Comments »
Feb
12
2009

Dropping Interest Rates Boost FHA Mortgages and Need for Quality Control

With mortgage rates at their lowest levels in over 20 years, brokers, retail lenders, wholesale lenders, banks, and credit unions are seeing increased volume in their residential mortgage pipelines. With this increase comes a need for sound quality control practices.

Salt Lake City, UT – February 11, 2009 – Recently, the Associated Press reported that mortgage rates reached 4.96 percent in mid-January. This is the lowest recorded level since Freddie Mac began its rate survey in 1971. With interest rates so low, the volume of residential mortgage loans has steadily increased, particularly in the FHA arena. So that a certain level of quality is maintained, one of HUD’s requirements is that institutions originating FHA loans perform an audit on 10% of the loan files that they have either closed or cancelled. These audits can either be done on a quarterly or monthly basis, depending on volume. In some circumstances, other agencies and investors are adapting this same requirement. According to Craig Christensen, President and COO of Mortgage Compliance Advisors, LLC, “more and more investors are requiring brokers, correspondents, and others to have a quality control plan in place that provides for [quality control] audits, before approval or renewal of contracts.”

Third party firms, such as Mortgage Compliance Advisors, LLC, can perform this 10% quality control file audit function, along with other compliance and quality control functions, for brokers, lenders, banks, and credit unions. These services help organizations remain compliant with FHA, investor, and other agency guidelines and maintain high loan quality. Furthermore, since quality control file audits are required by HUD/FHA, HUD mortgagees will be prepared for the eventuality of an FHA onsite audit, by keeping management reports (a summary of the files audits for a certain period) on file.

Management reports (sometimes referred to as quality control findings reports) are filled with detailed information that will significantly improve quality control. For example, when auditors at Mortgage Compliance Advisors, LLC, perform a file audit, they use a comprehensive audit checklist to check each page for accuracy and then record their findings. After the post-closing or cancelled file audit is complete, management reviews the audit’s findings and summarizes them into a management report that is accurate and easy to understand. Approximately 30 days after the files selected for audit have been received, Mortgage Compliance Advisors sends the report to the client to review. After reviewing the report, management can take any necessary action to ensure continued loan file quality and compliance with HUD/FHA or other conventional guidelines.

About Mortgage Compliance Advisors, LLC (MCA): MCA was founded on the premise of providing mortgage brokers, retail lenders, wholesale lenders, and banking institutions of all sizes with a sound alternative for meeting their mortgage compliance needs. MCA’s principals, Bob Warnock and Craig Christensen, have a combined sixty years of experience in the mortgage industry. Thirteen years of Bob Warnock’s thirty-five year career in the banking and mortgage industry were spent at the Salt Lake City HUD/FHA office, first as an underwriting specialist, then branch chief over underwriting and insuring, and finally as Field Office Chief with responsibility to oversee lender approval, underwriting, insuring and the assignment program. Much of Craig Christensen’s 25 year career has been in senior management positions with national retail and wholesale lenders.

For additional information on FHA file audits or questions about FHA approval, visit www.MortgageComplianceAdvisors.com.

Contact:
Sarah Adams – Director of Marketing
Mortgage Compliance Advisors, LLC
5505 South 900 East, Suite 110
Salt Lake City, UT 84117 Phone: 877-226-3217 Fax: 801-264-0301 sarah@mortgagecomplianceadvisors.com

###

No Comments »
Jul
07
2008

Mortgage Compliance Advisors Launches File Audit & FHA Approval & Quality Control Services

June 13, 2008 ( PowerHomeBiz ) – Salt Lake City, UT www.MortgageComplianceAdvisors.com — Mortgage Compliance Advisors, LLC (MCA) — FHA approval is made simple by following the step by step process that Mortgage Compliance Advisors offers. MCA will walk you through the costs, paperwork, and FHA requirements to determine feasibility. MCA also provides an outsourcing solution to brokers, lenders, and financial institutions that alleviates the burden and expense of regularly auditing, in-house, a 10% file sampling as required by federal and/or state agencies.

Also, for lenders who are not FHA approved and want to apply for approval, Mortgage Compliance Advisors will guide and help with the entire process including:
Determining feasibility of approval — Supply needed forms Help with preparation of documentation required by FHA for approval Provide resources for bonding/audits/sponsors – Help with assembling of approval package Follow up with FHA if difficulties arise Mortgage Compliance Advisors’ file audit process is efficient and effective. First, MCA randomly chooses, from a list provided by the lender, files to be reviewed. FHA requires file audits on 10% of a company’s closed files. Depending on volume, these audits are to be completed either on a monthly or quarterly basis. Some states require pre and post-closing file audits as well.
Once Mortgage Compliance Advisors has received the files to be reviewed, the assigned auditor uses a standardized checklist MCA has developed to review all documentation contained in a file and re-verifies documentation as needed. The auditor will also compare documentation to insure accuracy, as well as review the appraisal. A new credit report will be pulled on every file and appraisal field reviews will be completed as agency guidelines require. Once the file audits have been completed, MCA will provide a management report of significant findings and summaries.
In addition to full file audits (post-closing, pre-closing, and defaults) and FHA approval services, MCA provides loan file fraud detection services, training and CE courses, quality control plans, operational reviews, and consulting services.

About Mortgage Compliance Advisors, LLC (MCA):
MCA was founded on the premise of providing mortgage brokers, retail lenders, wholesale lenders, and banking institutions of all sizes with a sound alternative for meeting their mortgage compliance needs. MCA’s principals, Bob Warnock and Craig Christensen, have a combined sixty years of experience in the mortgage industry. Thirteen years of Bob Warnock’s thirty-five year career in the banking and mortgage industry were spent at the Salt Lake City HUD/FHA office, first as an underwriting specialist, then branch chief over underwriting and insuring, and finally as Field Office Chief with responsibility to oversee lender approval, underwriting, insuring and the assignment program. Much of Craig Christensen’s 25 year career has been in management positions with national retail and wholesale lenders.

Contact Info:
Brandt Page-Director of Sales & Marketing
5505 South 900 East, Suite 110 Salt Lake City, UT 84117 Phone: 801-649-6038 – Fax: 801-264-0301 bpage@mortgagecomplianceadvisors.com
http://mortgagecomplianceadvisors.com

No Comments »
May
23
2008

Frequently Asked Questions

The FAQs below apply directly to FHA approved mortgagees and non exempt residential mortgage entities in certain states; however, their application may be prudent for non FHA approved mortgage origination entities as well.

  1. Do I have to have a Quality Control Plan?
  2. Do any states currently require a Quality Control Plan?
  3. What are the goals of Quality Control?
  4. Does the Quality Control function need to be independent of the origination function?
  5. Do persons performing Quality Control reviews need to be qualified?
  6. When should Quality Control reviews be performed?
  7. How and how many loans are chosen for review?
  8. What needs to happen during the Quality Control loan review?
  9. Can my accountant provide Quality Control reviews?
  1. Do I have to have a Quality Control Plan?

    All FHA approved mortgagees, including loan correspondents, must have in place and implement a Quality Control Plan for the origination of insured mortgages as a condition of receiving and maintaining FHA approval. A copy of the plan must be submitted when applying for mortgagee approval. Quality Control must be a prescribed and routine function of each mortgagee�s operations whether preformed by a mortgagee�s staff or an outside source.

  2. Do any states currently require a Quality Control Plan?

    The Utah Division of Real Estate currently requires that principal lending managers establish and maintain a Quality Control Plan that includes at a minimum procedures for performing pre-closing and post-closing auditing of at least 10 % of all loan files and taking corrective action for problems identified through the audit process. Quality Control Plans which comply with HUD/FHA or Freddie Mac requirements shall be deemed to be in compliance with this rule.

  3. What are the goals of Quality Control?

    The following are the overriding goals of Quality Control. Mortgagees must design programs that meet these basic goals:

    • Assure compliance with FHA’s and the mortgagee’s own origination or servicing requirements throughout its operations;
    • Protect the mortgagee and FHA from unacceptable risk;
    • Guard against errors, omissions and fraud; and
    • Assure swift and appropriate corrective action.

  4. Does the Quality Control function need to be independent of the origination function?

    The Quality Control function must be independent of the origination function. This independence may be accomplished in a variety of ways. Depending on a mortgagee’s operations, loan volume, staff size or other factors, a mortgagee may prefer one method over another. Quality Control functions may be performed using:

    1. In-House Staff Mortgagees may establish a unit that is dedicated solely to Quality Control. Staff performing Quality Control reviews must not be involved in the day-to-day processes that they are reviewing.

    2. Outside Firms Mortgagees may engage outside sources to perform the Quality Control function. The FHA approved sponsors of loan correspondents are acceptable as such outside sources. A mortgagee contracting out any part of its Quality Control function is responsible for ensuring that the outside source is meeting HUD’s requirements. Any agreement with the outside source must be in writing, state the roles and responsibilities of each party, and be available for review by HUD staff.

  5. Do persons performing Quality Control reviews need to be qualified?

    Mortgagees must properly train staff involved in Quality Control and provide them access to current guidelines relating to the operations that they review. A mortgagee contracting out any part of its Quality Control function is responsible for ensuring that the outside source is meeting HUD’s requirements.

  6. When should Quality Control reviews be performed?

    Mortgagees must ensure that quality control reviews are performed on a regular and timely basis. Depending on a mortgagee’s production volume, origination reviews may be performed weekly, monthly, or quarterly. The review of a specific mortgage should be completed within 90 days of closing.

    For mortgagees closing more than 15 loans monthly, quality control reviews must be conducted at least monthly and must address one month’s activity. Mortgagees closing 15 or fewer loans monthly may perform quality control reviews on a quarterly basis.

  7. How and how many loans are chosen for review?

    The Quality Control Program must provide for the review of a representative sample of a mortgagee’s loans. This review must evaluate the accuracy and adequacy of the information and documentation used in reaching decisions in either the origination or servicing processes.

    Because it is not feasible to review all loans originated during a period, the Program must require that an appropriately sized sample is selected and evaluated during each review. A mortgagee who originates and/or underwrites 3,500 or fewer FHA loans per year must review 10% of the FHA loans it originates. A mortgagee who originates and/or underwrites more than 3,500 FHA loans per year may review 10 % of its loans or a statistical random sampling that provides a 95 % confidence level with 2 % precision. Each review must document how the sample size and selections were determined.

  8. What needs to happen during the Quality Control loan review?

    The Quality Control Program must provide for the review and confirmation of information on all loans selected for review.

    1. Credit Report. A new credit report must be obtained for each borrower whose loan is included in a Quality Control review, unless the loan was a streamline refinance or was processed using a FHA approved automated underwriting system exempted from this requirement.
    2. Credit Document Reverification. Documents contained in the loan file should be checked for sufficiency and subjected to written reverification.
    3. Appraisals. A desk review of the property appraisal must be performed on all loans chosen for a Quality Control review except streamline refinances and HUD Real Estate Owned (REO) sales. In certain circumstances, a field review may be required.
    4. Occupancy Reverification. In cases where the occupancy of the subject property is suspect, mortgagees must attempt to determine whether the mortgagor is occupying the property.
    5. Underwriting Decisions. Each Direct Endorsement loan selected for a quality control review must be reviewed for compliance with HUD underwriting requirements, sufficiency of documentation and the soundness of underwriting judgments.
    6. Condition Clearance and Closing Each loan selected for a quality control review must be reviewed to determine whether:

      • Conditions which were required to be satisfied prior to closing were in fact met prior to closing;
      • The seller was the owner of record, or was exempt from the owner of record requirement in accordance with HUD regulations;
      • The loan was closed and funds disbursed in accordance with the mortgagee’s underwriting and subsequent closing instructions; and
      • The closing and legal documents are accurate and complete.

  9. Can my accountant provide Quality Control reviews?

    There is often confusion with mortgagees in regard to the annual financial/FHA rule audit performed by an accoun
    tant and the at least quarterly Quality Control file audits performed by properly trained staff separate of production or by a qualified outside firm. The annual financial /FHA rule audit and the at least quarterly Quality Control file audits are two separate and distinct functions that must be conducted by mortgagees.

    Concerning the Quality Control file audits, mortgagees are required to properly train staff that are solely dedicated to Quality Control and provide them access to current guidelines relating to the operations that they may review.

    If mortgagees engage outside sources to perform any part of its Quality Control function, the mortgagee is responsible for insuring that the outside source is meeting HUDs requirements. Quality Control reviews must be done at least quarterly and must review the credit and collateral package in the loan file including compliance with HUD underwriting guidelines, assuring prior to closing conditions were met, closing documents were accurate and complete and the loan funded per underwriting and closing instructions. Any agreement with the outside source must be in writing, state the roles and responsibilities of each party, and be available for review by HUD staff.

    If outside sources, including accountants, are properly trained, have access to current HUD guidelines, are sufficiently familiar with HUDs requirements on all aspects of the loan process from application to funding, provide reviews at least quarterly and provide clear findings as to source and cause of deficiencies in writing to the mortgagee and to HUD as requested, the mortgagee can be relatively confident the outside source is qualified to conduct Quality Control reviews.

For more information, visit www.MortgageComplianceAdvisors.com.

, , , , , , , , ,

No Comments »