On July 25, 2019, the CFPB issued an advance notice of proposed rulemaking looking for feedback on the expiration of the temporary GSE patch. This patch specifically grants Qualified Mortgage status to loans eligible to be purchased or guaranteed by Fannie Mae or Freddie Mac. As it stands, the GSE patch will end in January 2021 and the CFPB has stated their intention to let it expire. Along with announcing the expiration of the GSE patch, the CFPB is asking for feedback as to whether the definition of a Qualified Mortgage should be revised.
In the mortgage world when you say the words quality control, post closing quality control loan file reviews immediately come to mind. Did you know that non-originated loan reviews are also considered a part of quality control? Freddie Mac’s Quality Control Best Practices states that as part of your quality control process you should include a random sample of your declined loan applications. In addition, FHA requires that you review a random statistical sample of rejected applications within 90 days from the end of the month in which the decision was made. Regulatory Solutions can assist you with these monthly non-originated reviews to ensure you ae in compliance with agency and regulatory requirements including the Equal Credit Opportunity Act (ECOA).
Freddie Mac requires that a Lender establish a pre-funding / pre-closing quality control loan review process that contains a sample selection and provides enough time for reviews to be completed before closing. There must be procedures established to report deficiencies to senior management and to take the appropriate corrective measures. The pre-funding (pre-closing) quality control loan review process must also document the resolution of any defects and should establish procedures for canceling/postponing a closing when the review reveals deficiencies or when the review cannot be completed before closing.
The pre-funding (pre-closing) quality control loan review should include loans that reflect the full scope of the Lender’s products. When selecting loans for review the Lender should make sure to target certain loan samples in order to review the work of new employees, confirm that a new product is being originated in accordance with policies, and to evaluate the work of a particular employee when fraud is suspected. The method in which the Lender chooses their samples should be examined regularly so as to ensure its effectiveness.
For the validation and re-verification process, Freddie Mac requires that the pre-funding (pre-closing) quality control loan review include validation or re-verification of: data entered into Loan Product Advisor; Social Security numbers (unless validated during the loan origination process); income documentation and its calculation; employment; assets required to close or meet reserve requirements; property valuation documentation; adequate mortgage insurance; and whether additional credit was granted and considered when the credit report reveals inquiries within the previous 120 days.
Regulatory Solutions is available to assist you with your pre-funding/pre-closing quality control reviews. Regulatory Solutions will provide you with the independent solution you need to ensure your pre-funding files are reviewed in accordance with agency guidelines.
I must tell you that you folks have been a “breath of fresh air” in working with us to get the system and process down.