Monday, July 11, 2022

QC Requirements for Non-Delegated Correspondents

UWM, and many other wholesale lenders, comply with the Fannie Mae requirement that all third parties have a quality control plan that meets their guidelines. Among other things, this means that 

  • you need to have periodic reviews, dependent on your volume, at least quarterly (See #1)
  • you report those results to management (See #1)
  • you certify that your plan meets all federal regulatory requirements (See #4)
  • your plan requires reviewers to have independence from the production process or that you use a 3rd party (See #3)
  • your scope includes the documents you are involved in producing (e.g.; origination, closing) (See #2)
This means that non-delegated correspondents who are table funders must thread the needle on quality control procedures to avoid expensive and redundant reviews. So we structure the non-delegated QC plan to ensure that you meet these requirements without assuming lender responsibilities. 

Quality Control Plan Showing regulatory compliance

Avoiding redundancy

We call it redundant because a requirement for a full forensic review of a loan file for a non-delegated correspondent means YOU review your LENDER'S work! The lender is already reviewing the documents that you provide. And the lender includes these loans in their own QC reviews. What is gained by conducting ANOTHER review? While there 

While there is nothing wrong with another set of eyes looking for fraud in a loan file. The review is better spent reviewing critical items within your loan files - specifically compliance. Did you retain everything you needed? 

Independence - Internal or Third-Party Quality Control Reviews

In our products, independence is created by the use of checklists. However, not every lender or regulator believes that you can create independence this way. If you have a very small company, it's unlikely that personnel tasked with reviews will not have involvement in the process they review. In that circumstance, you have to hire a 3rd party reviewer.

When hiring a 3rd party reviewer, remember that YOU define the scope of the review. Do not just request a quality control review. Create a specific scope of work. For non-delegated correspondents, those requirements generally fall within the scope of the regulatory compliance review we provide in Section 6 - Post-closing Financial, Compliance, and Document Retention Review. 

These reviews cost between $100-$200 per loan, depending on the company and your volume. If you need a referral to a good provider for these needs, please let us know, and we can make a recommendation based on your profile. 

Full Scope QC Reviews or Not?

If your near future plans include applying for Fannie Mae, Freddie Mac or HUD approval, you should consider upgrading your Quality Control Reviews to a "full-scope" investor/agency-level quality control review. These reviews give you insight into what the lenders are looking for, and the depth and scope of reviews at a more intense level. This review is a full forensic re-underwriting of the loan file, including re-ordering verifications, appraisals, credit, etc. 

Then you can start self-reporting and compiling the monthly reports to document your preparedness for lender-level quality control reporting responsibilities. 

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