Question
Our company is looking at performing
our pre-funding and post-funding quality control reviews in-house. What are the
pros and cons for handling the reviews?
Answer
The pros and cons are numerous and
there are many factors to consider. Here are a few to consider.
Bringing or maintaining in-house,
pre-funding and post-funding quality control reviews must be performed by an
operations staff that is separate from the mainstream processing and
underwriting departments, either at the branch or corporate level. In order to
maintain the integrity of the reviews, there cannot be any overlap into the
operations. In some cases, the Quality Control department is even located in a
different section or on a different floor of the building to ensure distinct department
and function boundary lines that may not be crossed. The con in this scenario
is hiring additional staff which need to be trained and managed.
A good outsourced quality control firm
will perform these reviews at a cost that is most likely comparable to, and usually less than, the
aggregate cost of maintaining and training employees to perform the same
tasks. The pro in this case is – or
should be! – the quality control company’s staff are subject matter experts in the
areas of quality control procedures, underwriting and compliance. That said,
not all QC auditors are efficient in delivering reports in a timely manner;
provide comprehensive, statistically derived analytics; or maintain adequate
resources and training for their auditors. Some cannot handle high volume or
fall behind in processing review times. An internal Quality Control department
can occasionally be pushed to meet reporting deadlines by sending to the
outsourced alternative the overflow files subject to audit.
An internal quality control department
also requires periodic testing for compliance with federal, state, and investor
requirements. The test must be able to demonstrate not only the implementation
of the quality control plan but also validate that the department has a full, written outline of its
processes and procedures. A “check the checker” test must also be able to
demonstrate the absence of bias in determining the overall performance and fulfillment of
pre-funding and post-closing reviews.
Brandy George
Executive Director/LCG Quality Control
Director/Underwriting Operations
Compliance
Lenders Compliance Group
