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QC is imperative for long-term mortgage servicing success, here’s why | Black Kite Express

Amanda Phillips, Executive Vice President of Compliance, Quality Management, ACES

In today’s mortgage landscape, ensuring the highest standards of loan quality is paramount not only during the origination process but also throughout the life of the loan. As the mortgage industry grapples with a changing market and regulatory complexities, we sat down with Amanda Phillips, Executive Vice President of Compliance ACES Quality Managementto explore how lenders can foster long-term success through a robust service quality assurance process.

Housing wire: What were some of the challenges lenders faced in 2023 and what are the outlook for 2024?

Amanda Phillips: 2023 was a year of trials and tribulations for financial institutions. Mortgage applications hit their lowest level since 1996, and lenders faced the compounding challenges of declining origination volume, rising home prices, rising interest rates, and inadequate mortgage inventory. households.

Fortunately, the tone of the real estate industry has changed in recent weeks. Analysts predict that 2024 will bring an increase in mortgage origination volume and potentially several interest rate cuts. While the challenge of low housing inventory persists across the country, I have a feeling loan officers will be busier. While the industry enjoys much-needed optimism heading into 2024, one thing is certain: quality control (QC) and compliance remain important and worthy of lenders’ attention. An increase in origination volume tends to lead to an increase in quality control defects.

HW: Why is quality control (QC) crucial for lenders in the mortgage industry and how can lenders maintain quality control effectively?

AP: Quality control is crucial for lenders to ensure loan quality and mitigate risk. A comprehensive quality control program can detect loan defects before regulators arrive for an examination or investors return loans for buyback. Operational capacity and the staggering cost of origination are challenges that lenders will continue to face, leading many lenders to offset this hurdle by maintaining mortgage servicing rights (MSR). To maintain profitability through MSR, lenders also need a robust service quality assurance program.

Maintaining quality control begins with regularly assessing the integrity of service portfolios and personnel to ensure they comply with all relevant service rules, guidelines and regulations. Fortunately, quality assurance is a crucial area where lenders can see immediate returns from easy-to-implement audit and compliance technology. Lenders are advised to regularly review and update operational/compliance procedures and quality assurance frameworks, conduct self-assessments to test those updates and, of course, remediate any findings.

To mitigate and manage risks inherent to the service, your risk management team must identify risk areas specific to your institution. From there, your internal audit team should ensure that the appropriate processes and procedures are in place to address those risks. The QC team is then responsible for verifying, from a transactional perspective, that your organization aligns its actions with its statements and takes the necessary actions regarding the associated risks. Traditional methods, such as manual tracking and spreadsheets, make this process even more error-prone. This is why the use of audit technology is so powerful; Errors are significantly reduced and efficiency is gained by requiring less manual input from the QA team.

The CFPB’s priorities note the importance of self-assessment and remediation. Dot your I’s and cross your T’s with a paper trail. Lenders should review their internal practices to ensure they meet the standard and compare them with regulators’ recommendations.

HW: What role does the Consumer Financial Protection Bureau (CFPB) play in the mortgage servicing landscape, especially as it relates to CARES Act compliance and servicing regulations?

AP: The CFPB continues to emphasize compliance with the CARES Act and other servicing regulations, particularly in areas such as fair lending, fair servicing, and forbearance. Over the past several years, they have clearly established priorities for fair lending and achieving equitable and fair housing programs. The CFPB has actively stated that strict reliance on artificial intelligence (AI) and complex automated credit models will not be tolerated. If a borrower was denied, the lender should be able to speak accurately and explain why and how the decision was made.

This is just another area of ​​how implementing a robust quality assurance process can help lenders avoid these regulatory hurdles. With audit technology, lenders will have this process documented and ready to initiate in the event of a regulatory audit or discrepancy.

HW: What measures should managers take to identify and manage the risks inherent in the provision of services?

AP: Administrators must identify specific risk areas, establish appropriate processes, and conduct audits of policies and procedures. An example of process improvement could be a call tracking program. Telephone interactions with consumers are an essential aspect of service that is easy to overlook from a quality perspective. No matter how many controls are in place, the need for human interaction, especially when it comes to collections and loss mitigation efforts, can result in an increased risk of noncompliance. Lenders can leverage a robust call monitoring program to identify where improvements are needed to protect the organization from regulations. and reputational risk. ACES Quality Management has a pre-built, configurable call monitoring audit package that allows administrators to quickly and seamlessly establish an additional layer of protection within their quality assurance program.

As financial institutions navigate the intricate web of compliance requirements and market fluctuations, ACES not only enables compliance with regulatory standards but elevates the entire loan quality paradigm. By fostering a culture of continuous improvement while equipping professionals with powerful data-driven insights, ACES becomes an invaluable ally in mitigating risks and improving operational efficiency.

The importance of strong quality control and management in the mortgage sector cannot be underestimated. In an environment where accuracy and compliance are non-negotiable, ACES is a testament to innovation and adaptability. For more tactical ways to improve quality control, download the free ACES manual: Three Lines of Defense for Maintaining Loan Quality.



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