QUESTION
We are a mortgage lender in the Midwest. We were doing portfolio retention through a servicer, but now we are bringing servicing in-house and doing our own servicing.
The plan is to launch the new servicing department in the next ninety days. We need a full complement of servicing policies and procedures.
In addition, we need to know about the system requirements for servicing quality control and the basic servicing quality control procedures.
Your firm provides a servicing policies and procedures library, so we hoped you could provide the information we need. Please note we contacted your office recently for assistance.
What are the system requirements for quality control servicing?
What are some quality control procedures involved in servicing?
ANSWER
We provide a policies and procedures compliance library for servicing (as well as one for mortgage loan originations). The compliance library is customized to your servicing platform. And we’ll maintain it for you.
As a servicer, you must have fully documented, written policies and procedures that address all aspects of mortgage servicing. If you want to contact me directly, I would be glad to discuss your needs in detail. Contact me here.
With respect to system requirements, I advise thinking ahead about the quality control system needs because how your system operates will determine its effectiveness and flexibility.
There are numerous investor and legal requirements in each
jurisdiction where you operate as a servicer. These must be well-documented and
provide for a review of the following:
·
aspects of the delinquent mortgage loan
servicing system;
·
the system to control and monitor bankruptcy
proceedings; and
·
the foreclosure monitoring system.
The servicer must develop a quality control program addressing delinquency management and default prevention. Proper staffing and training are mandatory. And you must implement a strong business continuity and disaster recovery program.
The servicer must audit quality control regularly at the loan level. (If you are subservicing, you must audit the servicer’s process at the loan level.) For loan level servicing quality control audits, contact us here.
The
servicer must implement certain primary system requirements for servicing
quality control, as follows:
1. Conduct regular testing of compliance with
applicable laws in all jurisdictions in which it operates;
2. Regularly review and assess the adequacy of
internal controls;
3. Keep a record of any activity under the
applicable internal systems;
4. Report comprehensive results of all testing to
the senior management;
5. Promptly take appropriate corrective action if
these systems identify a problem area; and
6. Make comprehensive testing results and any evidence of corrections available for review upon the investor’s request.
With respect to servicing quality control procedures, there are a few themes that run throughout the written policies and procedures. As a servicer, you must monitor your compliance with the investor’s requirements and federal and state mandates through regular quality control procedures that are ratified, established, conducted, and monitored.
The servicer
must maintain adequate quality control procedures and systems. Implementing a
self-assessment for various operational functions should be considered. At a
high level, the servicer must be able to:
· ensure that the mortgage loans are serviced under
sound mortgage banking and accounting principles and in compliance with investor
guidelines;
· guard against misrepresentation and dishonest,
fraudulent, or negligent acts by any parties involved in the mortgage loan
servicing process;
· protect against errors and omissions by
officers, employees, or other authorized persons;
· verify and audit the accuracy of the loan
adjustment (i.e., ARM adjustments) and facilitation of timely responses to
errors identified by the borrower, the servicer’s regulatory agency, or the
investor; and
· protect the investor’s investment in the security properties.
Failure to maintain adequate servicing quality control standards may result in a servicer being in breach of its contact with investors.
Furthermore, I urge you to perform annual quality control tests to ensure that all outsourcing firms and third-party vendors fully comply with investor guidelines and federal and state requirements.
Jonathan Foxx, Ph.D., MBA
Chairman & Managing Director
