Navigating Compliance Challenges: How a Mortgage Quality Control Partner Can Help

Navigating Compliance Challenges: How a Mortgage Quality Control Partner Can Help

Nexval Infotech

Nexval Infotech

A strong mortgage quality control (QC) function is essential for lenders not only for compliance risk mitigation – it also helps improve loan portfolio performance and inspires greater investor confidence. In the aftermath of the 2008 financial crisis, QC is deeply embedded in the industry’s regulatory framework.

From the Fair Housing Act (FHA) to the Home Mortgage Disclosure Act (HMDA) and the False Claims Act, there are several regulatory prerequisites to bear in mind when evaluating a prospective customer for a mortgage. And, the compliance burden is steadily increasing – for example, Bank of America recently had to pay a $12 million fine for misreporting mortgage data, easily avoidable through the right compliance risk mitigation steps like partnering with an experienced mortgage QC vendor.

Here’s how partnering with a leading compliance risk mitigation and QC firm can help your company:

1. Reduce operational workloads

Mortgage companies need to follow a rigorous checklist from the pre-closing stage to post-closing and mortgage servicing. This entails a substantial amount of manual effort, such as document verification, calculating debt-to-income ratios, collecting borrower information, and reviewing credit reports. In the post-closure stage, there’s effort involved in verifying loan file integrity, document accuracy, and record confirmation.

At a time when lenders’ bottom lines are already stressed due to rising interest, volatile volumes, and other market pressures, the operational workloads associated with mortgage QC can certainly take a toll. In this scenario, a QC partner can step in and provide the staffing and technology assistance needed. It allows mortgage companies to carefully complete their end-to-end QC checklists without cutting corners or making any quality trade-offs.

2. Manage costs

An average loan file will cost several hundreds of dollars in QC reviews, comprising both data verification and appraisal expenses. This cuts into lenders’ revenues, which are already declining. A report found that the average profitability in mortgage went from $18.8 billion in 2021 to $5.8 billion in 2022, making it imperative to find new efficiencies like savings in the compliance risk mitigation process.

A third-party vendor will offer competitive terms like outsourcing to a best-cost location. At the same time, they will ensure the availability of highly experienced, certified mortgage QC executives who can conduct detailed and reliable loan checks at a fraction of the original cost if the compliance risk mitigation process is managed intelligently.

Read more: 7 Factors to Consider When Choosing a Risk Management Platform

3. Benefit from the latest technologies

Due to the effort and data-intensive nature of mortgage processes, it is a prime candidate for technology transformation. Several of the regulatory and mandated mortgage QC steps can be performed by mortgage automation and other digital tools. The rise of artificial intelligence (AI) further increases the potential of technology for quality control. Unfortunately, most lenders lack the skills or resources needed to tap into this transformation.

A compliance risk mitigation partner will bring proven technology expertise to streamline QC processes with optimal effort and investments. For example, AI can sift through massive volumes of information, including raw data on income sources. This improves the quality of QC checks and minimizes the chance of onboarding bad loans into the portfolio. An external partner doesn’t just help lenders stay compliant; they can improve portfolio performance to drive overall business growth.

4. Stay ahead of compliance rules

As the Consumer Financial Protection Bureau (CFPB) increases its regulatory scrutiny with a growing commitment to resolving fair lending issues, lenders need to adapt their compliance risk mitigation practices. In the last couple of years, the CFPB has intensified its questioning of banks regarding their fair lending practices. Mortgage companies can no longer approach compliance as a reactive function and need to stay ahead of changing rules.

In this context, a third-party quality control partner can provide invaluable assistance and expertise. Lenders need not spend on the fixed capital costs of hiring compliance experts but still have an arsenal of compliance experts at hand. An outsourcing partner can help conduct detailed audits against mandatory and recommended guidelines. They can ensure that disclosure timelines are met and the findings are shared with the right stakeholders.

Read more: How to Avoid Mortgage Compliance Issues: An Actionable Guide

Meet Nexval, your mortgage quality control partner

Choosing the right outsourcing partner can be a challenge as lenders need complete trust and visibility into third-party operations, the technology stack, and projected costs. That is why it is important to choose a certified and experienced firm that not only offers a cost advantage but also extensive industry understanding. Further, they need to bring technology expertise to support the growing digitization of mortgage QC.

At Nexval, our team of 1000+ SMEs works closely with America’s top mortgage companies to streamline QC, improve portfolio quality, stay compliant, and continuously improve operations based on the data generated. We ensure that compliance risk mitigation accrues maximum value for mortgage providers at both pre-fund and post-close stages.

To learn more, speak to our mortgage QC experts.

Nexval Infotech

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