Aritas Mortgage Solutions

Best Practices for Impactful Mortgage Quality Control


Aritas Mortgage Solutions

December 11, 2023
Mortgage Professional's Hand Assessing Mortgage Papers


Mortgage Professional's Hand Assessing Mortgage Papers

$300 billion worth of debt and a loss reportedly over $81 billion—The story of China’s Evergrande is a cautionary tale for everyone in the real estate business around the world. According to a recent report in the New York Times, accounting errors and missing numbers did more damage to Evergrande’s business than Beijing’s political directives. Only time will tell what’s in store for this Chinese company. But if you’re a loan originator looking to minimize errors, setting up stringent mortgage quality control measures can help.

As loan originators, you’re not just navigating the market; you’re steering your ship through potential storms. A misstep can be costly and we’re sure that you don’t want to be in the headlines when things go south. Consider this blog as your guide to mortgage quality control best practices. You will also find a useful checklist that will act like your GPS system in the mortgage world.

Let’s start right at the beginning.

What Is Mortgage Quality Control?

Mortgage quality control is a systematic approach where lenders and brokers double-check their work to catch any potential errors or red flags. Think of it as a thorough inspection to guarantee that the loans are solid, compliant and won’t come back to haunt you. From verifying borrower information to confirming compliance with industry regulations, it is the safety net that helps you sail through unpredictable market conditions.

How Long Does Mortgage Quality Control Take?

The duration of mortgage quality control can vary depending on the size and complexity of the loan portfolio. On average, the process typically takes a few weeks. It involves a meticulous examination of loan files, documentation and compliance checks. While it might seem like a brief pause in the fast-paced world of mortgages, this timeframe is crucial for ensuring the long-term health and success of your business.

Importance of Mortgage Quality Control for Brokers & Lenders

Mortgage origination can be a bit like teaching your teenager to drive. You want everything to go smoothly, no unexpected bumps, right? You want your teen to learn the traffic rules and keep up with the changes. Likewise, as a lender or a broker, you want to help your client stay on top of the latest regulations to avoid running into compliance issues. No one wants a ticket, especially not from the legal traffic cops. Mortgage quality control makes sure your loan game is like a well-planned road trip with your kid eyeing a driver’s license. Together, you want to steer clear of legal bumps and let everyone know that they can put you in the driver’s seat without a worry.

Here are a few more reasons why you should care about mortgage quality control.

What’s in it for Me: Brokers

  • Compliance assurance: Quality control ensures that every aspect of the loan origination process complies with local, state and federal regulations, minimizing the risk of legal issues
  • Relationship with lenders: Consistent delivery of loan files that meet your client’s specific standards increase the likelihood of future collaborations
  • Competitive edge: Brokers known for accuracy and reliability are more likely to attract clients and stand out in a competitive industry

What’s in it for Me: Lenders

  • Regulatory compliance: Implementation of quality control measures ensuring that all loan origination activities adhere to the legal framework, reducing the risk of penalties and legal consequences
  • Loan portfolio performance: Quality control helps maintain the quality of loans, reducing the likelihood of defaults and contributing to a portfolio that meets investor and regulatory standards
  • Investor confidence: Quality control ensures that loans meet the standards required by investors, building confidence and potentially opening opportunities for more favorable financing terms

Pre-Funding (Pre-Closing) Mortgage Quality Control

This phase is the last line of defense before loans are finalized, making it a make-or-break moment for accuracy and compliance. The importance of pre-funding quality control cannot be overstated. We’ve prepared a comprehensive checklist to make sure your loans are not just ready for closing but are also primed for long-term success.

Pre-Funding QC Checklist:

  • Document Verification: Confirm that all required documents are present, accurate and up to date
  • Borrower Information: Verify the borrower’s identity, employment status and financial information
  • Credit Report Review: Scrutinize the credit report for accuracy and identify any potential red flags
  • Property Appraisal: Ensure that the property’s appraisal aligns with market standards and loan requirements
  • Regulatory Compliance: Double-check that the loan adheres to local, state, and federal regulations
  • Income Verification: Verify the borrower’s income through pay stubs, tax returns, or other relevant documentation. Learn about the A to Z of Mortgage Verification of Employment
  • Debt-to-Income Ratio: Evaluate the borrower’s debt-to-income ratio to assess their financial capacity
  • Loan Terms: Confirm that the loan terms match the initial agreement and meet lender standards
  • Underwriting Review: Conduct a final underwriting review to catch any discrepancies or oversights
  • Closing Disclosure: Ensure that the Closing Disclosure accurately reflects the loan terms and costs

Post-Closing Mortgage Quality Control Checklist

The importance of Post-Closing QC lies in its ability to detect any discrepancies or oversights that might have slipped through the cracks during the loan origination process. It’s the last chance to fine-tune the loan file before it enters the annals of your portfolio. This comprehensive checklist will help ensure that your loans are poised for a resilient journey ahead.

Post-Closing QC Checklist:

  • Loan File Integrity: Confirm the completeness and organization of the loan file, including all required documents
  • Document Accuracy: Verify the accuracy of all loan documents, ensuring they align with the information provided during origination
  • Data Accuracy: Scrutinize borrower details, loan terms and financial information for any discrepancies
  • Regulatory Compliance: Reassess the loan against local, state, and federal regulations to ensure ongoing compliance
  • Closing Disclosure Review: Confirm that the final Closing Disclosure accurately reflects the agreed-upon loan terms and costs. Explore our checklist to minimize the closing disclosure error
  • Funding Verification: Verify that the loan funds were disbursed correctly and in accordance with the closing instructions
  • Recordation Confirmation: Ensure that all necessary documents have been recorded appropriately with the relevant authorities
  • Escrow Account Accuracy: Confirm the accuracy of any escrow accounts and the handling of property taxes and insurance
  • Post-Closing Documents: Review and secure any post-closing documents required for compliance and record-keeping
  • Quality Assurance Review: Conduct a holistic review of the entire loan process, identifying any trends or areas for improvement

Related Post: 10 Challenges You Can Avoid with an Effective Mortgage Post-Close Audit

Why Outsource Mortgage Quality Control to Aritas?

Outsourcing mortgage quality control to Aritas is a smart move for efficiency and precision. Backed by over 15 years of industry experience, our seasoned experts ensure your loans meet top-notch standards. We customize solutions to your needs, saving you time and resources. At Aritas, we offer an efficient, effective and economical way to outsource mortgage processing.

Try our services at ZERO costs for a month.

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