Quality control is an integral part of the mortgage process. So much that Freddie Mac and other government sponsored entities require quality control programs to be established before they will purchase loans from lenders. There are several steps to the quality control process, with each being important to ensuring that loans that are originated responsibly and correctly.
Much of the mortgage process involves verification of identity, credit and financial information. During quality control reviews, re-verification of these items is carried out in order to avoid any confusion in the future. Accurate information in a loan file is extremely important to banks and mortgage lenders because it can mean the difference in absolving them of poor business practices. If a loan happened to end up as the subject of litigation, it would be critical for the lender to prove that it followed all necessary procedures in verifying the information provided by the borrower.
Mortgage banking laws and regulations are continually changing and adapting to market fluctuations. That's why it's important for mortgage companies to have strong compliance departments that oversee lending practices and are committed to following regulations. Compliance checks are an aspect of the quality control process that ensures lenders are originating loans in accordance with the law. Severe penalties can be imposed on lenders who ignore the rules and issue loans irresponsibly, so it is essential for quality control professionals to protect their companies, as well as their borrowers, from poor lending practices.
Mortgage fraud is a reality in the market. Many different types of mortgage fraud exist, and opportunistic individuals will take advantage of lenders and borrowers alike. Fraud detection and prevention is needed in the quality control process to protect the integrity of the transaction and limit risk. Quality control professionals are trained in fraud detection and use a variety of tools to prevent it. Software exists to detect certain types of fraud, but attention to detail throughout the quality control process can reveal small inconsistencies that may lead to the prevention of fraudulent activities.
Quality control departments are responsible not only for the quality of their companies' loans, but also the quality of the individuals who represent their companies. Quality control programs may include the need for a percentage of loans from a specific loan officer, processor or underwriter to be audited. Additionally, some programs stipulate the need for new employees' work to be subjected to routine audits for a specified amount of time. This part of the quality control process is implemented to guarantee the highest possible lending standards that will contribute to successful business relationships between lenders, borrowers and investors.